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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report |
Not Applicable | Bermuda | |
(Translation of Registrant’s Name | (Jurisdiction of Incorporation or | |
Into English) | Organization) |
Hong Leong Building
Singapore 048581
(Address and Telephone Number of Principal Executive Offices)
Chief Financial Officer
#39-01A Hong Leong Building
Singapore 048581
Tel: +65 6220 8411
Fax: +65 6221 1172
Name of Each Exchange on Which | ||
Title of Each Class | Registered | |
Common Stock, par value US$0.10 per Share | The New York Stock Exchange |
None
(Title of Class)
None
(Title of Class)
Large accelerated filero | Accelerated filerþ | Non-accelerated filero |
U.S. GAAPo | International Financial Reporting Standards as issuedþ | Othero | ||
by the International Accounting Standards Board |
CHINA YUCHAI INTERNATIONAL LIMITED
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EX-8.1 Subsidiaries of the Registrant | ||||||||
EX 12.1 Certifications furnished pursuant to Section 302 of the Sarbanes-Oxley Act | ||||||||
EX-13.1 Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act |
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• | political, economic and social conditions in China, including the Chinese government’s specific policies with respect to foreign investment, economic growth, inflation and the availability of credit, particularly to the extent such current or future conditions and policies affect the truck and diesel engine industries and markets in China, our diesel engine customers, the demand, sales volume and sales prices for our diesel engines and our levels of accounts receivable; |
• | the effects of an uneven economic recovery and current volatility in stock markets around the world caused by various factors, including the growing geopolitical unrest in the Middle East, United Nations approved military action against Libya and the natural disasters and nuclear crisis occurring in Japan, on our business, operating results and growth rates; |
• | the effects of competition in the diesel engine market on the demand, sales volume and sales prices for our diesel engines; |
• | the effects of existing material weaknesses in our internal control over financial reporting and our ability to implement and maintain effective internal control over financial reporting; | |
• | our ability to collect and control our levels of accounts receivable; |
• | our dependence on the Dongfeng Automobile Company and other major diesel truck manufacturers controlled by or affiliated with the Dongfeng Automobile Company; |
• | our ability to successfully manufacture and sell our 4108 (YC4D), 4110 (YC4E), 4112 (YC4G), 4F, 4G, 6105 (YC6J), 6108 (YC6A and YC6B), 6112 (YC6G), 6L/6M (formerly referred to as 6113) heavy-duty diesel engines and any new products; |
• | our ability to finance our working capital and capital expenditure requirements, including obtaining any required external debt or other financing; |
• | the effects of inflation on our financial condition and results of operations, including the effects on Yuchai’s costs of raw materials and parts and labor costs; |
• | our ability to successfully implement the Reorganization Agreement, as amended by the Cooperation Agreement (both as defined in “Item 4. Information on the Company — History and Development — Reorganization Agreement”) (See “Item 4. Information on the Company — History and Development — Cooperation Agreement”); |
• | our ability to control Yuchai and consolidate Yuchai’s financial results; |
• | the effects of China’s political, economic and social conditions on our financial condition, results of operations, business or prospects; |
• | the effects of uncertainties in the Chinese legal system, which could limit the legal protection available to foreign investors, including with respect to the enforcement of foreign judgments in China; |
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• | the ability of HLGE to repay their debt obligations to us; |
• | the effects of changes to the international, regional and economic climate and market conditions in countries where the HLGE group’s hospitality operations are located, as well as related global economic trends that adversely impact the travel and tourism industries; |
• | the outbreak of communicable diseases, such as the Influenza A (H1N1) virus and the Avian flu, if not contained, and its potential effects on the operations of the HLGE group and its business in the hospitality industry; and |
• | the impact of terrorism, terrorist events, airline strikes, hostilities between countries or increased risk of natural disasters or viral epidemics that may affect travel patterns and reduce the number of travelers and tourists to the HLGE group’s hospitality operations. |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE. |
ITEM 3. | KEY INFORMATION. |
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IFRS | ||||||||||||||||
Year ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||
Rmb | Rmb | Rmb | US$ | |||||||||||||
(in thousands) | ||||||||||||||||
Selected Consolidated Statement of Income Data: | ||||||||||||||||
Revenues, net | 10,404,788 | 13,175,903 | 16,208,184 | 2,472,116 | ||||||||||||
Gross profit | 2,049,136 | 2,545,818 | 4,008,931 | 611,453 | ||||||||||||
Research and development costs | (184,794 | ) | (297,259 | ) | (324,123 | ) | (49,436 | ) | ||||||||
Operating profit | 615,742 | 854,257 | 1,949,672 | 297,369 | ||||||||||||
Other income, net | 19,460 | 77,555 | 87,628 | 13,365 | ||||||||||||
Equity in income/(loss), net of affiliates | 16,409 | (13,046 | ) | (54,023 | ) | (8,239 | ) | |||||||||
Profit before tax from continuing operations | 481,742 | 966,668 | 1,765,203 | 269,234 | ||||||||||||
Income tax expenses | (110,526 | ) | (147,223 | ) | (327,946 | ) | (50,019 | ) | ||||||||
Profit from continuing operations | 371,216 | 819,445 | 1,437,257 | 219,215 | ||||||||||||
(Loss)/profit after tax for the year from discontinued operations | (33,985 | ) | 13,022 | 12,655 | 1,930 | |||||||||||
Profit for the year | 337,231 | 832,467 | 1,449,912 | 221,145 | ||||||||||||
Attributable to owners of the Parent | 240,036 | 628,331 | 1,117,297 | 170,413 | ||||||||||||
Non-controlling interests | 97,195 | 204,136 | 332,615 | 50,732 | ||||||||||||
Basic and diluted earnings per common share attributable to ordinary equity holders of the Parent | 6.44 | 16.86 | 29.98 | 4.57 | ||||||||||||
Profit from continuing operations per share | 9.96 | 21.99 | 38.57 | 5.88 | ||||||||||||
Profit for the year per share | 9.05 | 22.34 | 38.91 | 5.93 | ||||||||||||
Weighted average number of shares | 37,268 | 37,268 | 37,268 | 37,268 |
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As of December 31, | ||||||||||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||
Rmb | Rmb | Rmb | US$(1) | |||||||||||||
(in thousands) | ||||||||||||||||
Selected Consolidated Balance Sheet Data: | ||||||||||||||||
Working capital(2) | 977,190 | 1,429,011 | 2,488,296 | 379,521 | ||||||||||||
Property, plant and equipment, net | 2,548,736 | 2,975,169 | 3,276,302 | 499,711 | ||||||||||||
Trade accounts and bills receivable, net | 2,538,135 | 2,506,701 | 4,234,475 | 645,854 | ||||||||||||
Short-term bank loans | 1,148,732 | 667,173 | 423,543 | 64,600 | ||||||||||||
Trade and other payables | 3,604,128 | 6,190,246 | 7,902,317 | 1,205,283 | ||||||||||||
Total assets | 9,967,644 | 13,305,911 | 16,246,263 | 2,477,924 | ||||||||||||
Long-term bank loans | 176,756 | 411,875 | 201,850 | 30,787 | ||||||||||||
Non-controlling interests | 1,169,779 | 1,360,459 | 1,687,980 | 257,455 | ||||||||||||
Equity attributable to owners of the Parent | 3,445,180 | 4,049,331 | 5,097,947 | 777,552 |
Year ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||
Rmb | Rmb | Rmb | US$(1) | |||||||||||||
(in thousands) | ||||||||||||||||
Selected Consolidated Statement of Cash Flows Data: | ||||||||||||||||
Net cash provided by operating activities | 697,180 | 3,969,358 | 1,464,964 | 223,440 | ||||||||||||
Capital expenditures(3) | 376,440 | 780,836 | 629,626 | 96,032 |
US GAAP | ||||||||
Year ended December 31, | ||||||||
2006 | 2007 | |||||||
Rmb | Rmb | |||||||
(in thousands) | ||||||||
Selected Consolidated Statement of Income Data: | ||||||||
Revenues, net | 6,920,528 | 9,556,303 | ||||||
Gross profit | 1,272,121 | 1,944,718 | ||||||
Research and development costs | (167,653 | ) | (153,146 | ) | ||||
Operating profit | 304,479 | 841,556 | ||||||
Other income, net | 38,856 | 53,554 | ||||||
Equity in (loss)/income, net of affiliates | (22,449 | ) | 14,048 | |||||
Earnings before income taxes and non-controlling interests | 203,395 | 783,914 | ||||||
Income tax expenses | (30,466 | ) | (68,518 | ) | ||||
Income before non-controlling interests | 172,929 | 715,396 | ||||||
Non-controlling interests in income of consolidated subsidiaries | (61,645 | ) | (189,927 | ) | ||||
Net income | 111,284 | 525,469 | ||||||
Basic and diluted earnings per common share | 2.99 | 14.10 | ||||||
Weighted average number of shares | 37,268 | 37,268 |
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As of December 31, | ||||||||
2006 | 2007 | |||||||
Rmb | Rmb | |||||||
(in thousands) | ||||||||
Selected Consolidated Balance Sheet Data: | ||||||||
Working capital(2) | 457,449 | 1,028,732 | ||||||
Property, plant and equipment, net | 1,795,405 | 2,158,246 | ||||||
Trade accounts and bills receivable, net | 1,480,918 | 3,107,785 | ||||||
Short-term bank loans | 1,009,134 | 819,164 | ||||||
Trade accounts payables | 2,132,798 | 2,509,962 | ||||||
Total assets | 7,961,357 | 9,579,184 | ||||||
Long-term bank loans | 675,454 | 767,929 | ||||||
Non-controlling interests | 693,296 | 849,527 | ||||||
Total Shareholders’ equity | 2,728,399 | 3,294,465 |
Year ended December 31, | ||||||||
2006 | 2007 | |||||||
Rmb | Rmb | |||||||
(in thousands) | ||||||||
Selected Consolidated Statement of Cash Flows Data: | ||||||||
Net cash provided by operating activities | 634,146 | 84,554 | ||||||
Capital expenditures(3) | 323,781 | 265,258 |
(1) | The Company’s functional currency is the U.S. dollar and its reporting currency is Renminbi. The functional currency of Yuchai is Renminbi. Translation of amounts from Renminbi to U.S. dollars is solely for the convenience of the reader. Translation of amounts from Renminbi to U.S. dollars has been made at the rate of Rmb 6.5564 = US$1.00, the rate quoted by the People’s Bank of China at the close of business on March 31, 2011. No representation is made that the Renminbi amounts could have been, or could be, converted into U.S. dollars at that rate or at any other rate prevailing on March 31, 2011 or any other date. The rate quoted by the People’s Bank of China at the close of business on December 31, 2010 was Rmb 6.6227 = US$1.00. | |
(2) | Current assets less current liabilities. | |
(3) | Purchase of property, plant and equipment and payment for construction in progress. |
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Dividend paid by Yuchai | ||||
Dividend paid by the Company | to the Company(1) | |||
to its shareholders for the | for the financial year / in the financial | |||
Financial | financial year / in the financial year | year | ||
Year | (per share) | (in thousands) | ||
2007 | US$0.10(2) | Rmb 108,313 (US$15,811)(3) | ||
2008 | US$0.10(4) | Rmb 72,284 (US$10,564)(5) | ||
2009 | US$0.10(6) | Rmb 144,565 (US$21,130)(7) | ||
2010 | US$0.25(8) | Rmb 451,775 (US$69,213)(9) | ||
2011 | Not yet declared |
(1) | Dividends paid by Yuchai to us, as well as to other shareholders of Yuchai, were declared in Renminbi and paid in US dollars (as shown in parentheses) based on the exchange rates at local designated foreign exchange banks on the respective payment dates. For dividends paid for 2007, 2008, 2009 and 2010, the exchange rate used was Rmb 6.8505 = US$1.00, Rmb 6.8425 = US$1.00, Rmb 6.8417 = US$1.00 and Rmb 6.5273 = US$1.00 respectively. | |
(2) | On September 28, 2007, we declared a second interim dividend of US$0.10 per ordinary share amounting to US$3.7 million to all shareholders in respect of the fiscal year ended December 31, 2006. This dividend was paid to the shareholders on October 24, 2007. | |
(3) | The dividend declared for the fiscal year ended December 31, 2007 by Yuchai was paid to us on August 22, 2008. | |
(4) | On August 25, 2008, we declared an interim dividend of US$0.10 per ordinary share amounting to US$3.7 million to all shareholders in respect of the fiscal year ended December 31, 2007. This dividend was paid to the shareholders on September 19, 2008. | |
(5) | The dividend declared by Yuchai for fiscal year ended December 31, 2008 was paid to us on November 12, 2009. | |
(6) | On September 24, 2009, we declared a dividend of US$0.10 per ordinary share amounting to US$3.7 million to all shareholders in respect of the fiscal year ended December 31, 2008. This dividend was paid to the shareholders on October 16, 2009. | |
(7) | The dividend declared by Yuchai for fiscal year ended December 31, 2009 was paid to us on May 14, 2010. | |
(8) | On March 5, 2010, we declared a dividend of US$0.25 per ordinary share amounting to US$9.3 million to all shareholders in respect of the fiscal year ended December 31, 2009. This dividend was paid to the shareholders on March 30, 2010. | |
(9) | The dividend declared by Yuchai for fiscal year ended December 31, 2010 was paid to us on May 5, 2011. |
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Noon Buying Rate(1) | ||||||||
(Rmb per US$1.00) | ||||||||
Period | High | Low | ||||||
September 2010 | 6.8102 | 6.6869 | ||||||
October 2010 | 6.6912 | 6.6397 | ||||||
November 2010 | 6.6892 | 6.6330 | ||||||
December 2010 | 6.6745 | 6.6000 | ||||||
January 2011 | 6.6364 | 6.5809 | ||||||
February 2011 | 6.5965 | 6.5520 | ||||||
March 2011 | 6.5743 | 6.5483 |
Noon Buying Rate(1) | ||||||||||||||||
(Rmb per US$1.00) | ||||||||||||||||
Period | ||||||||||||||||
Period | End | Average(2) | High | Low | ||||||||||||
2006 | 7.8041 | 7.9579 | 8.0702 | 7.8041 | ||||||||||||
2007 | 7.2946 | 7.5806 | 7.8127 | 7.2946 | ||||||||||||
2008 | 6.8225 | 6.9193 | 7.2946 | 6.7800 | ||||||||||||
2009 | 6.8259 | 6.8307 | 6.8470 | 6.8176 | ||||||||||||
2010 | 6.6000 | 6.7696 | 6.8330 | 6.6000 | ||||||||||||
2011 (through March 31, 2011) | 6.5483 | 6.5783 | 6.6364 | 6.5483 |
(1) | The noon buying rate in New York for cable transfers payable in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. Since April 1994, the noon buying rate has been based on the rate quoted by the PBOC. As a result, since April 1994, the noon buying rate and the PBOC rate have been substantially similar. The PBOC rate at the end of December 31, 2010 was Rmb 6.6227 compared with Rmb 6.7696 for the noon buying rate (average) for the year ended December 31, 2010. | |
(2) | Determined by averaging the rates on each business day of each month during the relevant period. |
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• | our interim operating results; |
• | the availability of raw materials used in our engine production, particularly steel and cast iron; |
• | the public’s reaction to our press releases and announcements and our filings with the SEC; |
• | changes in financial estimates or recommendations by stock market analysts regarding us, our competitors or other companies that investors may deem comparable; |
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• | operating and stock price performance of our competitors or other companies that investors may deem comparable; |
• | changes in general economic conditions, especially the sustainability of the global recovery in view of the growing geopolitical unrest in the Middle East which has led to the United Nations approving of military action against Libya, the renewal of concerns over the sovereign debt crisis in Europe and the economic impact of the natural disasters and nuclear crisis occurring in Japan; |
• | future sales of our Common Stock in the public market, or the perception that such sales could occur; or |
• | the announcement by us or our competitors of a significant acquisition. |
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• | improvements in competitors’ products; | |
• | increased production capacity of competitors; | |
• | increased utilization of unused capacity by competitors; and | |
• | price competition. |
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• | obtaining the necessary supplies, including the availability of raw materials; |
• | hiring and training skilled production workers and management personnel; |
• | manufacturing and delivering products for increased orders in a timely manner; | |
• | maintaining quality standards and prices; | |
• | controlling production costs; and |
• | obtaining adequate funding on commercially reasonable terms for future growth. |
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• | changes to the international, regional and local economic climate and market conditions (including, but not limited to; changes to regional and local populations, changes in travel patterns and preferences, and oversupply of or reduced demand for hotel rooms that may result in reduced occupancy levels and performance for the hotels it operates); |
• | changes to the political, economic, legal or social environments of the countries in which the HLGE group operates (including developments with respect to inflation, interest rates, currency fluctuations, governmental policies, real estate laws and regulations, taxation, fuel costs, expropriation, including the impact of the current global financial crisis); |
• | increased threat of terrorism, terrorist events, airline strikes, hostilities between countries or increased risk of natural disasters or viral epidemics that may affect travel patterns and reduce the number of travelers and tourists; |
• | changes in laws and governmental regulations (including those relating to the operation of hotels, preparation and sale of food and beverages, occupational health and safety working conditions and laws and regulations governing its relationship with employees); |
• | competition from other international, regional and independent hotel companies, some of which may have greater name recognition and financial resources than the HLGE group (including competition in relation to hotel room rates, convenience, services or amenities offered); |
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• | losses arising out of damage to the HLGE group’s hotels, where such losses may not be covered by the insurance policies maintained by the HLGE group; |
• | increases in operating costs due to inflation, labor costs (including the impact of unionization), workers’ compensation and health-care related costs, utility costs, insurance and unanticipated costs such as acts of nature and their consequences; |
• | fluctuations in foreign currencies arising from the HLGE group’s various currency exposures; | |
• | dependence on leisure travel and tourism; |
• | the outbreak of communicable diseases, such as the Influenza A (H1N1) virus and the Avian flu, which if not contained, could potentially adversely affect the operations of the HLGE group and its business in the hospitality industry; and |
• | adverse effects of a downturn in the hospitality industry. |
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ITEM 4. | INFORMATION ON THE COMPANY. |
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• | Through our 76.4% interest in Yuchai, we primarily conduct our manufacturing and sale of diesel engines which are mainly distributed in the PRC market; |
• | As of March 15, 2011, we had a 47.4% equity interest in HLGE. On March 24, 2011, our equity interest in HLGE increased to 48.4% as a result of the conversion of a certain number of Series B redeemable convertible preference shares held by us into HLGE ordinary shares. The HLGE group is engaged in hospitality and property development activities conducted mainly in the PRC and Malaysia; and | |
• | As of March 15, 2011, we had a 12.2% equity interest in TCL. |
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Series | ||
Trucks | YC4BJ, YC4D, YC4E, YC4F, YC4FA, YC4G, YC6A, YC6B, YC6G, YC6J, YC6K, YC6L, YC6M, YC6MK | |
Bus | YC6MK, YC6M(CNG), YC6M, YC6L, YC6J, YC6J(CNG), YC6G, YC6G(CNG), YG6A, 4G, 4E, 4D, 4FA, 4F | |
Construction | YC4A, YC4B, YC4D, YC4F, YC6B, YC6J, YC6M, YC6A | |
Agriculture | YC4A, YC4B, YC6B, YC4D, YC6J | |
Marine | YC4D, YC6M, YC6A/6B, 6T, 6C | |
Generator-Drive | YC4D, YC6B, YC6A, YC6G, YC6M, YC6MK, YC6T, 6C |
• | The 4108 (YC4D) engine was launched in the market in 2001 based on 6108 (YC6A and YC6B) engines. The 4108 (YC4D) engine is designed for light trucks and passenger vehicles and commercial production began in 2001. |
• | The 4112 (YC4G) engine was primarily based on the 6112 (YC6G) engine and is designed for use in light to medium-duty cargo trucks and buses. The 4112 (YC4G) engine also features low emission characteristics. Commercial production of the engine began in late 2001. |
• | The YC4F/YC4FA/YC4G engine is a four-cylinder, four-stroke engine with a rated power ranging from 90 to 115 PS. The 4F/4FA/4G diesel engines were developed based on technologies from Germany and Japan for mini buses, trucks and passenger cars. Trial production of the 4F engines commenced in mid-2004. |
• | The YC4D/YC4E engine is a four-cylinder, four-stroke engine with a rated power ranging from 120 to 180 PS. The YC4D diesel engine was co-developed by Yuchai and Germany FEV, and features lower emission, lower fuel & oil consumption, lower noise, higher reliability, lower price and better upgrading potential. TheYC4E series diesel engine was developed on the basis of the YC6G series diesel engine with a displacement of 7.8 liters through stroke-shortening and bore-reducing which maintains advantages over the YC6G series diesel engines and features higher dynamic characteristics, easier operation and maintenance, and is used in high-speed and light-duty vehicles. |
• | The YC4G was also further developed to be used in hybrid buses. This relatively small diesel engine coupled with a motor will enable the hybrid bus to power medium to large buses and at the same time reduce fuel consumption and reduce emissions. The YC4G is rated at 170-220PS. |
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2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||||||||||||||
Revenues, | Revenues, | Units | Revenues, | Revenues, | Units | Revenues, | Revenues, | Units | ||||||||||||||||||||||||||||
net | net | Sold | net | net | Sold | net | net | Sold | ||||||||||||||||||||||||||||
Rmb (in thousands) | ||||||||||||||||||||||||||||||||||||
Diesel engines | ||||||||||||||||||||||||||||||||||||
6105 (YC6J) | 2,202,856 | 21.2 | % | 75,633 | 2,886,987 | 21.9 | % | 96,486 | 3,496,149 | 21.6 | % | 114,844 | ||||||||||||||||||||||||
6108 (YC6A and YC6B) | 1,491,211 | 14.3 | % | 61,734 | 1,677,095 | 12.7 | % | 65,834 | 2,625,278 | 16.3 | % | 103,500 | ||||||||||||||||||||||||
6112 (YC6G) | 623,459 | 6.0 | % | 11,830 | 514,273 | 3.9 | % | 8,455 | 715,451 | 4.4 | % | 12,186 | ||||||||||||||||||||||||
6L | 579,568 | 5.6 | % | 8,904 | 593,829 | 4.5 | % | 11,156 | 1,039,345 | 6.4 | % | 19,099 | ||||||||||||||||||||||||
6M | 452,397 | 4.3 | % | 11,235 | 756,701 | 5.8 | % | 17,483 | 1,413,696 | 8.8 | % | 32,862 | ||||||||||||||||||||||||
4-Series | 3,534,245 | 34.0 | % | 202,798 | 4,891,482 | 37.2 | % | 268,430 | 4,780,971 | 29.6 | % | 269,031 | ||||||||||||||||||||||||
Diesel power generators & others(1) | 1,500,286 | 14.6 | % | 146 | 1,840,720 | 14.0 | % | 55 | 2,087,525 | 12.9 | % | 70 | ||||||||||||||||||||||||
10,384,022 | 100.0 | % | 372,280 | 13,161,087 | 100.0 | % | 467,899 | 16,158,415 | 100.0 | % | 551,592 | |||||||||||||||||||||||||
(1) | Others mainly represent the revenues earned through engine parts sales, hotel incomes, guarantee fees and diesel power generators. |
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2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||||
% of | % of | % of | % of | % of | ||||||||||||||||||||||||||||||||||||
total | total | total | total | total | ||||||||||||||||||||||||||||||||||||
Units | Units | Units | Units | Units | Units | Units | Units | Units | units | |||||||||||||||||||||||||||||||
Diesel Engines: | ||||||||||||||||||||||||||||||||||||||||
6105 (YC6J) | 66,439 | 23.9 | % | 82,345 | 21.4 | % | 72,779 | 21.8 | % | 104,814 | 22.9 | % | 97,462 | 20.9 | % | |||||||||||||||||||||||||
6108 (YC6A and YC6B) | 39,057 | 14.1 | % | 66,526 | 17.3 | % | 61,169 | 18.3 | % | 66,941 | 14.6 | % | 89,922 | 19.3 | % | |||||||||||||||||||||||||
6112 (YC6G) | 14,358 | 5.2 | % | 12,996 | 3.4 | % | 11,954 | 3.6 | % | 8,909 | 1.9 | % | 12,725 | 2.7 | % | |||||||||||||||||||||||||
6L | 1,366 | 0.5 | % | 5,618 | 1.5 | % | 9,025 | 2.7 | % | 11,483 | 2.5 | % | 17,863 | 3.9 | % | |||||||||||||||||||||||||
6M | 7,331 | 2.6 | % | 15,830 | 4.1 | % | 11,492 | 3.4 | % | 20,122 | 4.4 | % | 35,330 | 7.6 | % | |||||||||||||||||||||||||
4-Series | 149,347 | 53.7 | % | 201,204 | 52.3 | % | 168,058 | 50.2 | % | 245,953 | 53.7 | % | 212,388 | 45.6 | % | |||||||||||||||||||||||||
Total | 277,898 | 100.0 | % | 384,519 | 100.0 | % | 334,477 | 100.0 | % | 458,222 | 100.0 | % | 465,690 | 100.0 | % | |||||||||||||||||||||||||
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2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||||||||||||||
Sales | Sales | Unit | Sales | Sales | Unit | Sales | Sales | Unit | ||||||||||||||||||||||||||||
Revenue | Revenue | Sales | Revenue | Revenue | Sales | Revenue | Revenue | Sales | ||||||||||||||||||||||||||||
Rmb | Rmb | Rmb | ||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||||
Total Domestic Sales | 10,352,114 | 99.7 | % | 371,243 | 13,138,630 | 99.8 | % | 467,377 | 16,125,550 | 99.8 | % | 550,865 | ||||||||||||||||||||||||
Total Export Sales | 31,908 | 0.3 | % | 1,037 | 22,457 | 0.2 | % | 522 | 32,865 | 0.2 | % | 727 | ||||||||||||||||||||||||
10,384,022 | 100.0 | % | 372,280 | 13,161,087 | 100.0 | % | 467,899 | 16,158,415 | 100.0 | % | 551,592 | |||||||||||||||||||||||||
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• | Hotel Equatorial Shanghai |
Hotel Equatorial Shanghai is located in the heart of Shanghai. The property has more than 500 saleable guest rooms which have all been fully refurbished and a new lounge. Other facilities comprise six food and beverage outlets, ballroom space and a health club. | ||
• | Copthorne Hotel Qingdao |
The property is located in the commercial district of Qingdao. The property has approximately 450 saleable guest rooms, and has restaurants and bars, ballrooms and function rooms, entertainment facilities, offices and retail space. | ||
• | Elite Residences |
The property comprises a 16-storey building is located in the downtown Shanghai. The property has 119 saleable newly renovated apartment units, meeting rooms and a business centre. | ||
• | Hotel Equatorial Cameron |
The property is a tudor styled resort comprising more than 100 self-contained low-rise and high-rise units. Each suite is equipped with a living room, a kitchenette and a balcony. The hotel tower comprises 270 saleable guest rooms. |
• | Renovation and maintenance. |
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ITEM 4A. | UNRESOLVED STAFF COMMENTS. |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS. |
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• | The first step in implementing this plan occurred in March 2005 when through our wholly-owned subsidiary, Venture Delta, we acquired a 15.0% equity interest in TCL. As of December 31, 2009, our interest in TCL was 34.4% of TCL’s outstanding ordinary shares and our aggregate investment in TCL amounted to approximately S$81.7 million (approximately US$64.8 million), before taking into account dividends and interest income of approximately S$1.9 million (approximately US$1.5 million), in the aggregate, earned from these investments. |
• | As of December 31, 2010, following the completion of the capital reduction and cash distribution exercise undertaken by TCL and completion of the sale of a total of 536,000,000 shares in TCL at a price of S$0.03 per share on an ex-distribution basis to various purchasers through a placement exercise, our shareholding interest in TCL was 12.2% and our aggregate investment in TCL amounted to approximately S$11.2 million (US$8.9 million). |
• | As of March 15, 2011, our interest in TCL remained unchanged. |
• | We previously accounted for our investment in TCL using the equity method and we have accordingly classified our investment in TCL as held for trading for the fiscal year ended December 31, 2010 following the above disposal. |
• | In February 2006, through the following wholly-owned subsidiaries, we also acquired debt and equity securities in HLGE for an aggregate consideration of approximately S$132.0 million (approximately US$104.8 million): |
(a) | Grace Star acquired |
i. | 191,413,465 ordinary shares representing approximately 29.1% of the total number of HLGE’s ordinary shares at that time, |
ii. | 15,376,318 Series A redeemable convertible preference shares in the capital of HLGE, or the Existing HLGE RCPS A. The Existing HLGE RCPS A is mandatorily redeemable by HLGE upon the disposal of certain properties and upon any new issue of HLGE ordinary shares with the purpose of raising funds for the redemption of Existing HLGE RCPS A. Any outstanding Existing HLGE RCPS A will be mandatorily redeemed in March 2015. The Existing HLGE RCPS A can also be converted into ordinary shares at the conversion ratio of 1:1 upon the passing of a special resolution at a meeting of the holders of Existing HLGE RCPS A at any time prior to March 2015. |
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iii. | 107,634,237 Series B redeemable convertible preference shares in the capital of HLGE, or the Existing HLGE RCPS B (and together with the Existing HLGE RCPS A, the Existing HLGE RCPS). The Existing HLGE RCPS B is neither mandatorily redeemable nor redeemable at the option of the Company. Any Existing HLGE RCPS B, which are not redeemed prior to March 2010, are mandatorily converted to ordinary shares at the conversion ratio of 1:1 in March 2010. The Existing HLGE RCPS B are redeemable upon the disposal of certain properties and upon any new issue of HLGE ordinary shares with the purpose of raising funds for the redemption of Existing HLGE RCPS B. The Existing HLGE RCPS B can also be converted into ordinary shares at the conversion ratio of 1:1 upon the passing of a special resolution at a meeting of the holders of Existing HLGE RCPS B at any time prior to March 2010. |
(b) | Venture Lewis acquired approximately S$129.4 million (approximately US$102.7 million) in principal amount of outstanding secured non-convertible bonds issued by HLGE, or the Existing HLGE Bonds. |
• | In June and December of 2006, HLGE partially redeemed a portion of Existing HLGE RCPS A and Existing HLGE RCPS B as required by the terms of the preference share agreement as a result of the disposals of certain assets. The proceeds from the partial redemptions amounted to approximately S$2.4 million (approximately US$1.9 million) and resulted in a reduction in the number of Existing HLGE RCPS that we held through Grace Star from 123,010,555 to 113,159,191. |
• | In July 2006, pursuant to a rights issue by HLGE, through Grace Star and Venture Lewis, respectively, we were allotted 196,201,374 non-redeemable convertible cumulative preference shares, or the New HLGE NCCPS, and S$130,800,917 in principal amount of zero coupon unsecured non-convertible bonds due 2009 in HLGE, or the New HLGE Bonds, for an aggregate consideration of approximately S$135.0 million (approximately US$107.1 million). In conjunction with the allotment, the Existing HLGE Bonds were redeemed by HLGE at their principal value of S$129.4 million. At settlement, the aggregate consideration payable by the Company to HLGE of S$134.7 million was partially offset against S$129.4 million payable by HLGE to the Company, and the balance of S$5.3 million (approximately US$4.2 million) was paid by the Company in cash. |
• | In November 2006, Grace Star converted all of its 196,201,374 New HLGE NCCPS into HLGE ordinary shares resulting in an increase in its equity interest in HLGE from 29.1% to 45.4% thereby triggering the mandatory conditional cash offers under The Singapore Code on Take-over and Mergers for all the HLGE ordinary shares, the Existing HLGE RCPS and the New HLGE NCCPS which Grace Star did not already own, control or agree to acquire. The mandatory offers lapsed on December 27, 2006 and no securities were purchased by Grace Star. |
• | As of December 31, 2006, we held through Grace Star (i) 387,614,839 HLGE ordinary shares, representing approximately 45.4% of the total number of HLGE ordinary shares; (ii) 113,159,191 Existing HLGE RCPS; and through Venture Lewis (iii) S$130,800,917 in principal amount of the New HLGE Bonds. Our aggregate investment in HLGE to-date amounted to approximately S$136.9 million (approximately US$108.7 million), before taking into account previous interest income earned from these investments and partial redemption of the Existing HLGE RCPS of approximately S$6.7 million (approximately US$5.3 million) in aggregate. |
• | On June 19, 2007, HLGE made a partial redemption of the New HLGE Bonds. The principal amount redeemed was approximately S$17.9 million (approximately US$14.2 million) and resulted in a reduction in the principal amount of the New HLGE Bonds that we held through Venture Lewis from S$130,800,917 to S$112,886,727. The Company had engaged an independent professional valuer, to value the financial instruments acquired as at June 19, 2007 (before redemption) and as at December 31, 2007. The fair value is determined by discounting the expected payments to the valuation date using a discount rate commensurate with the risk of the payments. |
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• | As of December 31, 2007, we held through Grace Star (i) 387,614,839 HLGE ordinary shares, representing approximately 45.4% of the total number of HLGE ordinary shares; (ii) 13,957,233 Existing HLGE RCPS A; (iii) 99,201,958 Existing HLGE RCPS B; and through Venture Lewis (iv) S$112,886,727 in principal amount of the New HLGE Bonds. Our aggregate investment in HLGE to-date amounted to approximately S$136.5 million (approximately US$108.3 million), before taking into account previous interest income earned from these investments and partial redemption of the Existing HLGE RCPS of approximately S$6.7 million (approximately US$5.3 million) in aggregate. |
• | In April 2008, HLGE made an additional partial redemption of the Existing HLGE RCPS B. The redemption amount we received amounted to approximately S$0.98 million (approximately US$0.7 million) on April 30, 2008 and resulted in a reduction in the number of Existing HLGE RCPS that we held through Grace Star from 113,159,191 to 107,186,403. |
• | In June 2008, HLGE made another partial redemption of the New HLGE Bonds. The principal amount redeemed was approximately S$25.9 million (approximately US$20.6 million) and resulted in a reduction in the principal amount of the New HLGE Bonds that we held through Venture Lewis from S$112,886,727 to S$87,010,673. We account for our investment in HLGE as a subsidiary upon adoption of IFRS. |
• | On February 3, 2010, we announced the extension for another year of the S$93,000,000 loan granted to HLGE by our wholly-owned subsidiary, Venture Lewis to HLGE to refinance the New HLGE Bonds which matured on July 3, 2009. Under the terms of the original loan agreement, on the maturity date of the New HLGE Bonds, HLGE will fully redeem the New HLGE Bonds held by all minority New HLGE Bondholders and pay to Venture Lewis a portion of the principal and gross redemption yield. The remaining amount due to Venture Lewis on the maturity date would be refinanced through an unsecured loan arrangement with a one-year term, renewable by mutual agreement between the parties on an annual basis. An option for HLGE to undertake a partial redemption of the New HLGE Bonds on a pro-rata basis prior to the maturity date was included in the loan agreement. On February 19, 2009, HLGE announced an early partial redemption of the new HLGE Bonds on a pro-rata basis of up to S$9.0 million in principal amount of the outstanding New HLGE Bonds and on March 23, 2009, HLGE effected payment to all bondholders. The principal amount redeemed of approximately S$8.96 million (approximately US$7.1 million) to us had resulted in a reduction in the principal amount of the New HLGE Bonds that we held through Venture Lewis from S$87,010,673 to S$78,053,577. On January 31, 2011, we announced the extension for another one year of the S$93,000,000 loan from July 2011 July 2012. The terms of the new loan agreement are substantially similar to the previous loan agreement except that the interest payable has been reduced from 3.42% per annum to 2.52% per annum. On February 16, 2011, HLGE effected a partial prepayment of S$10 million towards the loan to us resulting in a reduction in the principal amount of the loan from S$93,000,000 to S$83,000,000. |
• | On February 12, 2010, HLGE announced the mandatory conversion of an aggregate of 18,935,883 Existing HLGE RCPS B into 18,935,883 ordinary shares in the capital of HLGE on March 18, 2010 (“Mandatory Conversion Date”). As of February 12, 2010, Grace Star held 93,229,170 Existing HLGE RCPS B representing approximately 98.28% of the existing total number of Existing HLGE RCPS B. By a written notice to HLGE on February 11, 2010, Grace Star notified HLGE that pursuant to HLGE’s Articles of Association, it will be converting only 17,300,000 out of the 93,229,170 Existing HLGE RCPS B it held into HLGE ordinary shares so as not to trigger a take-over obligation under The Singapore Code on Take-overs and Mergers on the Mandatory Conversion Date. Grace Star has an option under HLGE’s Articles of Association to convert the remaining 75,929,170 Existing HLGE RCPS B into HLGE ordinary shares over a period of twenty-two months after the Mandatory Conversion Date (“Extension Period”). With the conversion of 17,300,000 Existing HLGE RCPS B into HLGE ordinary shares on the Mandatory Conversion Date, Grace Star’s shareholding interest in HLGE increased from 45.4% to 46.4% with effect from March 24, 2010 upon receipt of regulatory approval. On September 20, 2010, Grace Star notified HLGE that it would be converting 16,591,000 Existing HLGE RCPS B into HLGE ordinary shares and on September 23, 2010, Grace Star’s shareholding interest in HLGE increased from 46.4% to 47.4%. On March 21, 2011, Grace Star notified HLGE that it would be converting 17,234,000 Existing HLGE RCPS B into HLGE ordinary shares on March 24, 2011, Grace Star’s shareholding interest in HLGE increased from 47.4% to 48.4%. See “Item 3. Key Information — Risk Factors — Risks relating to our investment in HLGE — The HLGE Group may be unable to raise sufficient funds to pay their debt obligations to us and our conversion of all our existing Series B redeemable convertible preference shares in HLGE may not be successful or may result in increased costs.” |
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• | allowances for doubtful accounts and loans receivable; | |
• | realization of the carrying value of inventories; | |
• | product warranty obligations; |
• | recoverability of the carrying values of equity method investments and other investments; | |
• | realization of deferred tax assets; and | |
• | impairment of long-lived assets. |
December 31, | ||||||||||||
2009 | 2010 | 2010 | ||||||||||
Rmb | Rmb | US$ | ||||||||||
(in thousands) | ||||||||||||
Balance at beginning of year | 96,147 | 76,646 | 11,690 | |||||||||
Credit to consolidated statements of operations | (15,552 | ) | (15,491 | ) | (2,363 | ) | ||||||
Written off | (3,947 | ) | — | — | ||||||||
Translation differences | (2 | ) | 6 | 1 | ||||||||
Balance at end of Year | 76,646 | 61,161 | 9,328 | |||||||||
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December 31, | ||||||||||||
2009 | 2010 | 2010 | ||||||||||
Rmb | Rmb | US$ | ||||||||||
(in thousands) | ||||||||||||
Balance at beginning of year | 188,599 | 259,534 | 39,585 | |||||||||
Provision charged to consolidated statements of operations | 368,284 | 498,767 | 76,073 | |||||||||
Amounts utilized | (297,349 | ) | (406,147 | ) | (61,947 | ) | ||||||
Balance at end of year | 259,534 | 352,154 | 53,711 | |||||||||
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• | Property, plants and equipments Rmb 1.4 million (US$0.2 million) (2009: Rmb 7.8 million) | |
• | Prepaid operating leases Rmb nil (US$ nil) (2009: Rmb nil) |
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Percentage of Net Revenues | ||||||||||||
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of sales | -80.3 | % | -80.7 | % | -75.3 | % | ||||||
Gross profit | 19.7 | % | 19.3 | % | 24.7 | % | ||||||
Other income | 0.2 | % | 0.7 | % | 0.5 | % | ||||||
Research & development costs | -1.8 | % | -2.3 | % | -2.0 | % | ||||||
Selling, distribution and administrative costs | -12.2 | % | -11.2 | % | -11.2 | % | ||||||
Operating profit | 5.9 | % | 6.5 | % | 12.0 | % | ||||||
Finance costs | -1.4 | % | -0.6 | % | -0.8 | % | ||||||
Share of profit of associates | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
Share of results of joint ventures | 0.1 | % | -0.1 | % | -0.3 | % | ||||||
Gain on acquisition of Guangxi Yulin Hotel Co in settlement of past loan | 0.0 | % | 1.5 | % | 0.0 | % | ||||||
Profit before tax from continuing operations | 4.6 | % | 7.3 | % | 10.9 | % | ||||||
Income tax expense | -1.1 | % | -1.1 | % | -2.0 | % | ||||||
Profit for the year from continuing operations | 3.5 | % | 6.2 | % | 8.9 | % | ||||||
(Loss)/profit after tax from discontinued operations | -0.3 | % | 0.1 | % | 0.1 | % | ||||||
Profit for the year | 3.2 | % | 6.3 | % | 9.0 | % | ||||||
Attributable to: | ||||||||||||
Owners of the Parent | 2.3 | % | 4.8 | % | 6.9 | % | ||||||
Non-controlling interest | 0.9 | % | 1.5 | % | 2.1 | % |
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For Year ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||
Rmb | Rmb | Rmb | US$ | |||||||||||||
(in thousands) | ||||||||||||||||
Net cash provided by operating activities | 697,180 | 3,969,358 | 1,464,964 | 223,440 | ||||||||||||
Net cash used in investing activities | (218,427 | ) | (800,445 | ) | (386,041 | ) | (58,880 | ) | ||||||||
Net cash used in financing activities | (398,571 | ) | (332,725 | ) | (666,628 | ) | (101,676 | ) | ||||||||
Effect of foreign currency exchange on cash and cash equivalents | (16,324 | ) | (1,902 | ) | (9,286 | ) | (1,416 | ) | ||||||||
Net increase in cash and cash equivalents | 63,858 | 2,834,286 | 403,009 | 61,468 | ||||||||||||
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Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Contractual Obligations | Total | 1 Year | 1-3 Years | 4-5 Years | 5 Years | |||||||||||||||
Rmb | Rmb | Rmb | Rmb | Rmb | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Short-term debt(1) | 429.1 | 429.1 | — | — | — | |||||||||||||||
Long-term debt(1) | 213.5 | — | 213.5 | — | — | |||||||||||||||
Purchase obligations regarding capital expenditures | 629.6 | 629.6 | — | — | — | |||||||||||||||
Operating lease commitments | 36.8 | 16.3 | 20.5 | — | — | |||||||||||||||
Total | 1,309.0 | 1,075.0 | 234.0 | — | — |
(1) | Includes contractual interest payments |
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Capital Expenditures |
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• | IFRS 3 Business Combinations | |
• | IFRS 7 Financial Instruments: Disclosures | |
• | IAS 1 Presentation of Financial Statements | |
• | IAS 27 Consolidated and Separate Financial Statements | |
• | IFRIC 13 Customer Loyalty Programmes |
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ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. |
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Year First Elected or | ||||||
Appointed Director | ||||||
Name | Position | or Officer | ||||
SAW Boo Guan(1) | President and Director | 2009 | ||||
GAN Khai Choon(1)(4) | Director | 1995 | ||||
KWEK Leng Peck(1)(2) | Director | 1994 | ||||
TAN Eng Kwee(3) | Director | 2010 | ||||
NEO Poh Kiat(1)(2)(3) | Director | 2005 | ||||
TAN Aik-Leang(1)(3) | Director | 2005 | ||||
Matthew RICHARDS(2)(3) | Director | 2006 | ||||
CHING Yew Chye | Director | 2010 | ||||
ZHANG Shi Yong(1) | Director | 2007 | ||||
HAN Yi Yong(1) | Director | 2010 |
Year First Elected or | ||||||
Appointed Director | ||||||
Name | Position | or Officer | ||||
HOH Weng Ming(1) (4) | Chief Financial Officer | 2008 | ||||
FOO Shing Mei Deborah | General Counsel | 2007 | ||||
Ira Stuart OUTERBRIDGE III | Secretary | 2001 |
(1) | Also a Director of Yuchai. | |
(2) | Member of the Compensation Committee. | |
(3) | Member of the Audit Committee. | |
(4) | Also a Director of HLGE. |
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Year First Elected or | ||||||
Appointed Director | ||||||
Name | Position | Position or Officer | ||||
YAN Ping | Chairman of the Board of Directors | 2005 | ||||
SAW Boo Guan(1) | Deputy Chairman of the Board of Directors | 2009 | ||||
Wu Qiwei | Director and General Manager | 2011 | ||||
GAN Khai Choon(1) | Director | 2007 | ||||
KWEK Leng Peck(1) | Director | 2005 | ||||
NEO Poh Kiat(1) | Director | 2008 | ||||
TAN Aik-Leang(1) | Director | 2005 | ||||
HOH Weng Ming | Director | 2008 | ||||
HAN Yi Yong(1) | Director and Company Secretary | 2010 | ||||
GU Tangsheng | Assistant to Chairman and Director | 2005 | ||||
ZHANG Shi Yong(1) | Director | 2007 | ||||
GAO Jia Lin | Director | 2011 | ||||
TAY Hui Boon Kelly(2) | Financial Controller | 2008 | ||||
LEE See Bee Patrick(2) | Vice President, International Sales | 2009 | ||||
CHENG Ningbin | Deputy General Manager | 2011 | ||||
ZHONG Yu Wei | Deputy General Manager | 2010 | ||||
NING Xingyong | Deputy General Manager | 2009 | ||||
LIANG Qinyan | Deputy General Manager | 2009 | ||||
QIN Xiaohong | Chief Accountant | 2007 | ||||
SHEN Jie | General Engineer | 2002 |
(1) | Also a Director of the Company. | |
(2) | Secondees of the Company, whose salaries and expenses are paid by the Company. |
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ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. |
Percentage | ||||||||
Identity of Person or Group | Number | (%) | ||||||
Hong Leong Asia Ltd(1) | 10,523,313 | 28.2 | % | |||||
The Yulin City Government(2) | 6,709,322 | 18.0 | % | |||||
Shah Capital Management(3) | 2,002,796 | 5.4 | % |
(1) | Information based upon a report on Schedule 13D jointly filed by Hong Leong Asia and its wholly-owned subsidiaries, Hong Leong China, HL Technology, Flite Technology Industries Pte Ltd and Lydale Pte Ltd, with the SEC on July 19, 2002, as amended on September 10, 2003, October 7, 2003, October 15, 2003 December 1, 2003, October 27, 2009, October 28, 2009 and August 30, 2010. Hong Leong Asia is the beneficial owner of and exercises control over the 10,523,313 shares of Common Stock or approximately 28.2% of the total number of shares of Common Stock held by its wholly-owned subsidiaries, HL Technology and Well Summit Investments Limited and the special share. See also “— Related Party Transactions — Shareholders Agreement.” Other than as described under “Item 3. Key Information — Risk Factors — Risks relating to our company and our business — We may experience a change of control as a result of offerings of shares by our controlling shareholders” and “— The Special Share,” we are not aware of any arrangement which may, at a subsequent date, result in a change of control of the Company. |
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(2) | Information based on a report on Schedule 13D filed by Coomber, Goldman, Zhong Lin and the State Holding Company, with the SEC on December 16, 2002, as amended on June 23, 2003, July 9, 2003, December 23, 2003, March 15, 2004, February 15, 2005, April 18, 2005, August 9, 2006 and September 29, 2006. Based on Amendment No. 4 to the Schedule 13D filed by Coomber and others with the SEC on December 23, 2003, Coomber is a wholly-owned subsidiary of Goldman, which is indirectly owned and controlled by Yulin City Municipal Government, or Yulin City Government, in Guangxi Zhuang Autonomous Region, PRC. Accordingly, the Yulin City Government is the ultimate beneficial owner of the 6,709,322 shares of the Company’s Common Stock held of record by Coomber. | |
(3) | Information based on a report on Schedule 13F filed by Shah Capital Management with the SEC on February 9, 2011 for the quarter ended December 31, 2010. |
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ITEM 8. | FINANCIAL INFORMATION. |
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ITEM 9. | THE OFFER AND LISTING. |
US$ | US$ | |||||||
Period | High | Low | ||||||
2006 | 10.00 | 4.53 | ||||||
2007 | 13.85 | 6.87 | ||||||
2008 | 11.98 | 2.49 | ||||||
2009 | 17.37 | 3.17 | ||||||
2010 | 32.45 | 12.30 | ||||||
2011 (through March 31, 2011) | 32.98 | 23.00 |
US$ | US$ | |||||||
Period | High | Low | ||||||
2009 First Quarter | 5.49 | 3.17 | ||||||
2009 Second Quarter | 8.89 | 4.48 | ||||||
2009 Third Quarter | 10.50 | 6.60 | ||||||
2009 Fourth Quarter | 17.37 | 8.60 | ||||||
2010 First Quarter | 19.92 | 12.30 | ||||||
2010 Second Quarter | 21.68 | 13.73 | ||||||
2010 Third Quarter | 19.49 | 15.17 | ||||||
2010 Fourth Quarter | 32.45 | 18.75 | ||||||
2011 First Quarter (through March 31) | 32.98 | 23.00 |
US$ | US$ | |||||||
Period | High | Low | ||||||
October 2010 | 26.00 | 18.75 | ||||||
November 2010 | 29.23 | 23.10 | ||||||
December 2010 | 32.45 | 25.51 | ||||||
January 2011 | 32.98 | 26.21 | ||||||
February 2011 | 30.95 | 24.22 | ||||||
March 2011 (through March 31, 2011) | 29.62 | 23.00 |
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ITEM 10. | ADDITIONAL INFORMATION. |
Standard for US Domestic Listed | China Yuchai International Limited’s | |
Companies | Practice | |
Director Independence | ||
• A majority of the board must consist of independent directors. | • Four of our ten directors, Messrs. Neo Poh Kiat, Tan Aik-Leang, Matthew Richards and Ching Yew Chye are independent within the meaning of the NYSE standards. | |
Independence is defined by various criteria including the absence of a material relationship between director and the listed company. Directors who are employees, are immediate family of the chief executive officer or receive over $120,000 per year in direct compensation from the listed company are not independent. |
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Standard for US Domestic Listed | China Yuchai International Limited’s | |
Companies | Practice | |
Directors who are employees of or otherwise affiliated through immediate family with the listed company’s independent auditor are also not independent. | ||
• The non-management directors of each company must meet at regularly scheduled executive sessions without management. | • Our non-management directors do not meet periodically without management directors. | |
Audit Committee | ||
• Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act. The rule requires that the audit committee (i) be comprised entirely of independent directors; (ii) be directly responsible for the appointment, compensation, retention and oversight of the independent auditor; (iii) adopt procedures for the receipt and treatment of complaints with resp ect to accounting, internal accounting controls or auditing matters; (iv) be authorized to engage independent counsel and other advisors it deems necessary in performing its duties; and (v) be given sufficient funding by the company to compensate the independent auditors and other advisors as well as for the payment of ordinary administrative expenses incurred by the committee. | • Our audit committee meets the requirements of Rule 10A-3 under the Exchange Act. One of the members of our audit committee, Mr. Tan Eng Kwee, qualifies for the exemption under Rule 10A-3(b)(iv)(D) under the Securities Exchange Act of 1934. See “Item 16D, Exemptions from the Listing Standards for Audit Committee”. | |
• The audit committee must consist of at least three members, and each member meets the independence requirements of both the NYSE rules and Rule 10A-3 under the Exchange Act. | • Our audit committee currently consists of four members, three of whom meets the independence requirements of both the NYSE rules and Rule 10A-3 under the Exchange Act and the fourth appointed pursuant to the exemption under Rule 10A-3(b)(1)(iv)(D) under the Securities Exchange Act of 1934. See “Item 16D, Exemptions from the Listing Standards for Audit Committee”. | |
• The audit committee must have a written charter that addresses the committee’s purpose and responsibilities. | • Our audit committee has a charter outlining the committee’s purpose and responsibilities, which are similar in scope to those required of US companies. |
Standard for US Domestic Listed | China Yuchai International Limited’s | |
Companies | Practice | |
At a minimum, the committee’s purpose must be to assist the board in the oversight of the integrity of the company’s financial statements, the company’s compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence and the performance of the company’s internal audit function and independent auditors. The audit committee is also required to review the independent auditing firm’s annual report describing the firm’s internal quality control procedures, any material issues raised by the most recent internal quality control review or peer review of the firm, or by any recent governmental inquiry or investigation, and any steps taken to address such issues. | • Our audit committee’s charter outlines the committee’s purpose and responsibilities which are similar in scope to those required of US companies. |
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Standard for US Domestic Listed | China Yuchai International Limited’s | |
Companies | Practice | |
The audit committee is also required to assess the auditor’s independence by reviewing all relationships between the company and its auditor. It must establish the company’s hiring guidelines for employees and former employees of the independent auditor. The committee must also discuss the company’s annual audited financial statements and quarterly financial statements with management and the independent auditors, the company’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies, and policies with respect to risk assessment and risk management. It must also meet separately, periodically, with management, the internal auditors and the independent auditors. | • Our audit committee assesses the auditor’s independence on an ongoing basis by reviewing all relationships between the company and its auditor. It has established the company’s hiring guidelines for employees and former employees of the independent auditor. The committee also discusses the company’s annual audited financial statements and quarterly financial statements with management and the independent auditors, the company’s earnings press releases, as well as financial information and earning guidance provided to analysts and rating agencies, and policies with respect to risk assessment and risk management. It also meets separately, periodically, with management, the internal auditors and the independent auditors. | |
• Each listed company must disclose whether its board of directors has identified an Audit Committee Financial Expert, and if not the reasons why the board has not done so. | • The Board of Directors has identified Mr. Tan Aik-Leang as our Audit Committee Financial Expert. | |
• Each listed company must have an internal audit function. | • We are a holding company and the majority of business is done at our main subsidiary, Guangxi Yuchai Machinery Company Limited (“Yuchai”). Our group transactions, fees and expenses are reviewed by the Internal Audit Department of Hong Leong Asia. In addition, Yuchai maintains an independent internal audit function, headed by an internal audit manager who reports to the Audit Committee of Yuchai’s Board which approves the audit plans, reviews significant audit issues and monitors corrective actions taken by management. | |
Compensation Committee | ||
• Listed companies must have a compensation committee composed entirely of independent board members as defined by the NYSE listing standards. | • Our compensation committee currently has three members, two of whom are independent within the meaning of the NYSE standards. | |
• The committee must have a written charter that addresses its purpose and responsibilities. |
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Standard for US Domestic Listed | China Yuchai International Limited’s | |
Companies | Practice | |
• These responsibilities include (i) reviewing and approving corporate goals and objectives relevant to CEO compensation; (ii) evaluating CEO performance and compensation in light of such goals and objectives for the CEO; (iii) based on such evaluation, reviewing and approving CEO compensation levels; (iv) recommending to the board non-CEO compensation, incentive compensation plans and equity-based plans; and (v) producing a report on executive compensation as required by the SEC to be included in the company’s annual proxy statement or annual report. The committee must also conduct an annual performance self-evaluation. | • Our compensation committee reviews among other things the Company’s general compensation structure, and reviews, recommends or approves executive appointments, compensation and benefits of directors and executive officers, subject to ratification by the Board of Directors, and supervises the administration of our employee benefit plans, if any. | |
Nominating/Corporate Governance Committee | ||
• Listed companies must have a nominating/corporate governance committee composed entirely of independent board members. | • We do not have a nominating/corporate governance committee. However, certain responsibilities of this committee are undertaken by our Compensation Committee, such as the review and approval of executive appointments and all other functions are performed by the Board of Directors. | |
• The committee must have a written charter that addresses its purpose and responsibilities, which include (i) identifying qualified individuals to become board members; (ii) selecting, or recommending that the board select, the director nominees for the next annual meeting of shareholders; (iii) developing and recommending to the board a set of corporate governance principles applicable to the company; (iv) overseeing the evaluation of the board and management; and (v) conducting an annual performance evaluation of the committee. | ||
Equity-Compensation Plans | ||
• Shareholders must be given the opportunity to vote on all equity- compensation plans and material revisions thereto, with limited exceptions. | • We intend to have our shareholders approve equity-compensation plans. | |
Corporate Governance Guidelines | ||
• Listed companies must adopt and disclose corporate governance guidelines. | • We have formally adopted various corporate governance guidelines, including Code of Business Conduct and Ethics (described below); Audit Committee Charter; Whistle-blowing Policy; Insider Trading Policy; and Disclosure Controls and Procedures. | |
Code of Business Conduct and Ethics | ||
• All listed companies, US and foreign, must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any amendment to or waivers of the code for directors or executive officers. | • We adopted a Code of Business Conduct and Ethics Policy in May 2004, which was revised on December 9, 2008. The text of the Code is posted on our internet website at http://www.cyilimited.com/invest_govt.asp. We intend to promptly disclose any amendment to or waivers of the Code for directors or executive officers. |
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(a) | a resolution regarding granting any security or indemnity for any money lent or obligation incurred by such Director at the request, or for the benefit, of the Company or any of our subsidiaries (or a company of which we are a beneficially wholly-owned subsidiary); |
(b) | a resolution regarding granting any security or indemnity to any third party for a debt or obligation which is owed by the Company or any of our subsidiaries (or a company of which we are a beneficially wholly-owned subsidiary) to the third party, for which such Director has assumed responsibility in whole or in part under a guarantee or indemnity; |
(c) | a resolution about an offer of shares, debentures or other securities of the Company or any of its subsidiaries (or a company of which we are a beneficially wholly-owned subsidiary) for subscription or purchase in which such Director is to be a participant in the underwriting or sub-underwriting of the offer; |
(d) | a resolution about any proposal involving any other company in which such Director is interested, whether directly or indirectly and whether as an officer or shareholder or otherwise, provided that such Director is not the holder of, or directly or indirectly beneficially interested in, 5% or more of (i) any class of the equity share capital of such company or in any third company through which such Director’s interest is derived or (ii) the voting rights in that company; |
(e) | any contract, arrangement or proposal for the benefit of our employees under which such Director benefits in a similar manner as the employees and does not receive any privileges or advantages not provided to the employees; or |
(f) | any proposal in which such Director is interested in the same manner as other holders of our shares or our debentures or our other securities or any of our subsidiaries by virtue only of such Director’s interest in our shares or our debentures or our other securities or any of our subsidiaries. |
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• | be entitled, on a show of hands, to one vote and, on a poll, to one vote per share; |
• | be entitled to such dividends as the Board of Directors of the Company may from time to time declare; |
• | in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of the reorganization or otherwise or upon any distribution of capital, be entitled to a return of the amount paid up on the Common Stock and thereafter to the surplus assets of the Company; and |
• | generally, be entitled to enjoy all the rights attaching to shares. |
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• | to elect six Directors of the Company and to remove Directors so appointed; and |
• | no shareholder resolution, whether ordinary or special resolution, may be passed without the affirmative vote of the holder of the Special Share. |
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• | a financial institution, |
• | a dealer in securities, |
• | a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings, |
• | a tax-exempt organization, |
• | an insurance company, |
• | a person liable for alternative minimum tax, |
• | a person that actually or constructively owns 10% or more of the voting stock of the Company, |
• | a person that owns shares through a partnership or other pass-through entity, |
• | a person that holds shares as part of a straddle or a hedging or conversion transaction, or |
• | a person whose functional currency is not the US dollar. |
• | a citizen or resident of the United States, |
• | a US domestic corporation, |
• | an estate the income of which is subject to United States federal income tax regardless of its source, or |
• | a trust, if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. |
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• | at least 75% of its gross income is passive income, or |
• | at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”). |
• | the excess distribution or gain will be allocated ratably over the US Holder’s holding period for the shares; |
• | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which the Company is treated as a PFIC, will be treated as ordinary income; and |
• | the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
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ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
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December 31, 2009 | ||||||||||||||||||||
United | ||||||||||||||||||||
Singapore | Euro | States | Chinese | |||||||||||||||||
Group | Dollar | Dollars | Dollar | Renminbi | Others | |||||||||||||||
Rmb | Rmb | Rmb | Rmb | Rmb | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Other investments | 326,058 | — | — | — | — | |||||||||||||||
Trade and other receivables | 374 | 9,171 | 135,981 | 32,464 | — | |||||||||||||||
Cash and cash equivalents | 78,372 | 253 | 2,636 | — | 22 | |||||||||||||||
Financial liabilities | (492,752 | ) | — | — | — | — | ||||||||||||||
Trade and other payables | (66,889 | ) | — | (55,095 | ) | (1,446 | ) | (19 | ) | |||||||||||
Rmb | (154,837 | ) | 9,424 | 83,522 | 31,018 | 3 | ||||||||||||||
US$ | (23,616 | ) | 1,437 | 12,739 | 4,731 | — | ||||||||||||||
December 31, 2010 | ||||||||||||||||||||
United | ||||||||||||||||||||
Singapore | Euro | States | Chinese | |||||||||||||||||
Group | Dollar | Dollars | Dollar | Renminbi | Others | |||||||||||||||
Rmb | Rmb | Rmb | Rmb | Rmb | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Other investments | 59,615 | — | — | — | — | |||||||||||||||
Trade and other receivables | 424 | 20,072 | 122,757 | 35,290 | 18 | |||||||||||||||
Cash and cash equivalents | 90,804 | — | 3,117 | — | — | |||||||||||||||
Financial liabilities | (152,772 | ) | — | — | — | — | ||||||||||||||
Trade and other payables | (44,901 | ) | (674 | ) | (48,281 | ) | (4,453 | ) | (20 | ) | ||||||||||
Rmb | (46,830 | ) | 19,398 | 77,593 | 30,837 | (2 | ) | |||||||||||||
US$ | (7,143 | ) | 2,959 | 11,835 | 4,703 | — | ||||||||||||||
2009 | 2010 | 2010 | ||||||||||
Rmb | Rmb | US$ | ||||||||||
(in thousands) | ||||||||||||
Profit before tax | Profit before tax | Profit before tax | ||||||||||
Singapore dollar | (15,484 | ) | (4,683 | ) | (714 | ) | ||||||
Euro dollar | 942 | 1,940 | 296 | |||||||||
United States dollar | 8,352 | 7,759 | 1,184 | |||||||||
Chinese Renminbi | 3,102 | 3,084 | 470 |
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2009 | 2010 | 2010 | ||||||||||
Rmb | Rmb | US$ | ||||||||||
(in thousands) | ||||||||||||
Equity | 4,606 | 5,663 | 864 | |||||||||
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Number of | Value as at 31 December | Value as at 31 December | ||||||||||||||
shares | 2009 | 2010 | ||||||||||||||
Rmb | Rmb | US$ | ||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||
TCL | 898,990,352 | 327.5 | — | — | ||||||||||||
TCL | 318,737,352 | — | 56.6 | 8.6 |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. |
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. |
ITEM 15. | CONTROLS AND PROCEDURES |
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• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; | |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS; | |
• | provide reasonable assurance that receipts and expenditures are being made only in accordance with our management’s and/or our Board of Directors’ authorization; and | |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements. |
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In 2009, our assessment identified ineffective controls over the financial statement closing process that could affect our ability to complete and report our consolidated financial statements in a timely manner. Specifically, there were two areas where policies and procedures relating to the closure of our books resulted in post-closing adjustments to our books and records. These areas were: (1) the performance of the tax computation, which primarily relate to two subsidiaries of Yuchai that were established in 2008, and (2) the reconciliation and elimination of intercompany sales and balances.
(i) | Provided training at Yuchai relating to accounting for taxes and consolidation under IFRS; | ||
(ii) | Implemented procedures for quarterly closing and consolidation activities at Yuchai; and | ||
(iii) | Monitored the Yuchai closing processes on a quarterly basis to ensure adherence to the designed policies and procedures. |
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ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT. |
ITEM 16B. | CODE OF ETHICS. |
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ITEM 16C. | PRINCIPAL ACCOUNTANTS FEES AND SERVICES. |
Audit fees | Audit-related fees | Tax fees | Others | Total | ||||||||||||||||
Rmb | Rmb | Rmb | Rmb | Rmb | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
2009 | 7,333 | — | — | 717 | 8,050 | |||||||||||||||
2010 | 7,285 | — | — | 89 | 7,374 |
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. |
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. |
ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
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ITEM 16G. | CORPORATE GOVERNANCE |
ITEM 17. | FINANCIAL STATEMENTS. |
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ITEM 18. | FINANCIAL STATEMENTS. |
Reports of Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Income Statements for years ended December 31, 2008, 2009, and 2010 | F-4 | |||
Consolidated Statements of Comprehensive Income for years ended December 31, 2008, 2009 and 2010 | F-5 | |||
Consolidated Statements of Financial Position as of January 1, 2009, December 31, 2009 and 2010 | F-6 | |||
Consolidated Statements of Changes in Equity for years ended December 31, 2008, 2009 and 2010 | F-8 | |||
Consolidated Statements of Cash Flows for years ended December 31, 2008, 2009 and 2010 | F-11 | |||
Notes to the Consolidated Financial Statements for years ended December 31, 2008, 2009 and 2010 | F-14 |
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ITEM 19. | EXHIBITS. |
1.1 | Memorandum of Association of China Yuchai International Limited or the Registrant (incorporated herein by reference to Amendment No. 1 to the Registration Statement on Form F-1, filed by the Registrant on December 8, 1994 (File No. 33-86162), or the Form F-1). | |||
1.2 | Bye-laws of the Registrant (incorporated herein by reference to the Form F-1). | |||
3.1 | Subscription and Shareholders Agreement of Diesel Machinery (BVI) Limited, dated November 9, 1994, among Diesel Machinery (BVI) Limited, Hong Leong Asia Ltd., or Hong Leong Asia, and China Everbright Holdings Company Limited, or China Everbright Holdings (incorporated herein by reference to Amendment no. 2 to the Registration Statement on Form F-1, filed by the Registrant on December 14, 1994 (File No. 33-86162)). | |||
3.2 | Supplemental Subscription and Shareholders Agreement, dated January 21, 2002, between China Everbright Holdings and Hong Leong Asia (incorporated herein by reference to the Annual Report on Form 20-F for fiscal year ended December 31, 2001, filed by the Registrant on June 25, 2002 (File No. 001-013522), or Form 20-F FY2001). | |||
3.3 | Second Supplemental Subscription and Shareholders Agreement, dated May 17, 2002, between China Everbright Holdings and Hong Leong Asia (incorporated herein by reference to the Form 20-F FY2001). | |||
4.1 | Contract for the Subscription of Foreign Common shares in Guangxi Yuchai Machinery Company Limited, or Yuchai, and Conversion from a Joint Stock Limited Company into a Sino-Foreign Joint Stock Limited Company, dated April 1, 1993, among Yuchai, Guangxi Yuchai Machinery Holdings Company, Hong Leong Technology Systems (BVI) Ltd., Cathay Clemente Diesel Holdings Limited, Goldman Sachs Guangxi Holdings (BVI) Ltd., Tsang & Ong Nominees (BVI) Ltd. and Youngstar Holdings Limited with amendments, dated May 27, 1994 and October 10, 1994 (incorporated herein by reference to the Form F-1). | |||
4.2 | Subscription and Transfer Agreement (with Shareholders’ Agreement), dated April 1993, among Cathay Clemente (Holdings) Limited, GS Capital Partners L.P., Sun Yuan Overseas Pte Ltd., HL Technology Systems Pte Ltd and Coomber Investments Limited (incorporated herein by reference to the Registration Statement on Form F-1, filed by the Registrant on November 9, 1994 (File No. 33-86162)). | |||
4.3 | Amended and Restated Shareholders’ Agreement, dated as of November 9, 1994 among The Cathay Investment Fund, Limited, GS Capital Partners L.P., HL Technology Systems Pte Ltd, Hong Leong Asia Ltd., Coomber Investments Limited, China Everbright Holdings Company Limited, Diesel Machinery (BVI) Limited, owners of shares formerly held by Sun Yuan Overseas (BVI) Ltd. and the Registrant (incorporated herein by reference to the Form F-1). | |||
4.4 | Form of Amended and Restated Registration Right Agreement, dated as of November 9, 1994, among The Cathay Investment Fund, Limited, GS Capital Partners L.P., HL Technology Systems Pte Ltd, Coomber Investments Limited, owners of shares formerly held by Sun Yuan Overseas (BVI) Ltd. and the Registrant (incorporated herein by reference to Amendment No. 3 to the Registration Statement on Form F-1, filed by the Registrant on December 15, 1994 (File No. 33-86162)). | |||
4.5 | Form of Subscription Agreement between the Registrant and its wholly-owned subsidiaries named therein and Yuchai (incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form F-1, filed by the Registrant on December 14, 1994 (File no. 33-86162)). |
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4.6 | Form of Term Loan Agreement between the Registrant and Yuchai (incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form F-1, filed by the Registrant on December 14, 1994 (File No. 33-86162)). | |||
4.7 | Share Purchase and Subscription Agreement, dated as of November 9, 1994, between the Registrant, China Everbright Holdings Company Limited and Coomber Investments Limited (incorporated herein by reference to the Form F-1). | |||
4.8 | Form of indemnification agreement entered into by the Registrant with its officers and directors (incorporated herein by reference to the Annual Report on Form 20-F for fiscal year ended December 31, 2003, filed by the Registrant on June 29, 2004, or Form 20-F FY2003). | |||
4.9 | Agreement between the Registrant and Yuchai, dated July 19, 2003 (incorporated herein by reference to the Form 20-F FY2003). | |||
4.10 | Reorganization Agreement between the Company, Coomber and Yuchai, dated April 7, 2005 (incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on April 7, 2005 (File No. 001-13522)). | |||
4.11 | Reorganization Agreement Amendment (No. 1) between the Registrant, Coomber and Yuchai, dated December 2, 2005 (incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on December 6, 2005 (File No. 001-13522)). | |||
4.12 | Reorganization Agreement Amendment (No. 2) between the Registrant, Coomber and Yuchai, dated November 30, 2006 (incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on November 30, 2006 (File No. 001-13522)). | |||
4.13 | Cooperation Agreement among the Registrant, Yuchai, Coomber and Guangxi Yuchai Machinery Group Company Limited, dated June 30, 2007 (incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on July 5, 2007 (File No. 001-13522)). | |||
8.1 | Subsidiaries of the Registrant. (Filed herewith) | |||
12.1 | Certifications furnished pursuant to Section 302 of the Sarbanes-Oxley Act. (Filed herewith) | |||
13.1 | Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act. (Filed herewith) |
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CHINA YUCHAI INTERNATIONAL LIMITED | ||||
By: | /s/ Saw Boo Guan | |||
Name: | Saw Boo Guan | |||
Title: | President and Director | |||
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Exhibit | ||||
Number | Description of Exhibit | |||
1.1 | Memorandum of Association of China Yuchai International Limited or the Registrant (incorporated herein by reference to Amendment No. 1 to the Registration Statement on Form F-1, filed by the Registrant on December 8, 1994 (File No. 33-86162), or the Form F-1). | |||
1.2 | Bye-laws of the Registrant (incorporated herein by reference to the Form F-1). | |||
3.1 | Subscription and Shareholders Agreement of Diesel Machinery (BVI) Limited, dated November 9, 1994, among Diesel Machinery (BVI) Limited, Hong Leong Asia Ltd., or Hong Leong Asia, and China Everbright Holdings Company Limited, or China Everbright Holdings (incorporated herein by reference to Amendment no. 2 to the Registration Statement on Form F-1, filed by the Registrant on December 14, 1994 (File No. 33-86162)). | |||
3.2 | Supplemental Subscription and Shareholders Agreement, dated January 21, 2002, between China Everbright Holdings and Hong Leong Asia (incorporated herein by reference to the Annual Report on Form 20-F for fiscal year ended December 31, 2001, filed by the Registrant on June 25, 2002 (File No. 001-013522), or Form 20-F FY2001). | |||
3.3 | Second Supplemental Subscription and Shareholders Agreement, dated May 17, 2002, between China Everbright Holdings and Hong Leong Asia (incorporated herein by reference to the Form 20-F FY2001). | |||
4.1 | Contract for the Subscription of Foreign Common shares in Guangxi Yuchai Machinery Company Limited, or Yuchai, and Conversion from a Joint Stock Limited Company into a Sino-Foreign Joint Stock Limited Company, dated April 1, 1993, among Yuchai, Guangxi Yuchai Machinery Holdings Company, Hong Leong Technology Systems (BVI) Ltd., Cathay Clemente Diesel Holdings Limited, Goldman Sachs Guangxi Holdings (BVI) Ltd., Tsang & Ong Nominees (BVI) Ltd. and Youngstar Holdings Limited with amendments, dated May 27, 1994 and October 10, 1994 (incorporated herein by reference to the Form F-1). | |||
4.2 | Subscription and Transfer Agreement (with Shareholders’ Agreement), dated April 1993, among Cathay Clemente (Holdings) Limited, GS Capital Partners L.P., Sun Yuan Overseas Pte Ltd., HL Technology Systems Pte Ltd and Coomber Investments Limited (incorporated herein by reference to the Registration Statement on Form F-1, filed by the Registrant on November 9, 1994 (File No. 33-86162)). | |||
4.3 | Amended and Restated Shareholders’ Agreement, dated as of November 9, 1994 among The Cathay Investment Fund, Limited, GS Capital Partners L.P., HL Technology Systems Pte Ltd, Hong Leong Asia Ltd., Coomber Investments Limited, China Everbright Holdings Company Limited, Diesel Machinery (BVI) Limited, owners of shares formerly held by Sun Yuan Overseas (BVI) Ltd. and the Registrant (incorporated herein by reference to the Form F-1). | |||
4.4 | Form of Amended and Restated Registration Right Agreement, dated as of November 9, 1994, among The Cathay Investment Fund, Limited, GS Capital Partners L.P., HL Technology Systems Pte Ltd, Coomber Investments Limited, owners of shares formerly held by Sun Yuan Overseas (BVI) Ltd. and the Registrant (incorporated herein by reference to Amendment No. 3 to the Registration Statement on Form F-1, filed by the Registrant on December 15, 1994 (File No. 33-86162)). | |||
4.5 | Form of Subscription Agreement between the Registrant and its wholly-owned subsidiaries named therein and Yuchai (incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form F-1, filed by the Registrant on December 14, 1994 (File no. 33-86162)). |
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Exhibit | ||||
Number | Description of Exhibit | |||
4.6 | Form of Term Loan Agreement between the Registrant and Yuchai (incorporated herein by reference to Amendment No. 2 to the Registration Statement on Form F-1, filed by the Registrant on December 14, 1994 (File No. 33-86162)). | |||
4.7 | Share Purchase and Subscription Agreement, dated as of November 9, 1994, between the Registrant, China Everbright Holdings Company Limited and Coomber Investments Limited (incorporated herein by reference to the Form F-1). | |||
4.8 | Form of indemnification agreement entered into by the Registrant with its officers and directors (incorporated herein by reference to the Annual Report on Form 20-F for fiscal year ended December 31, 2003, filed by the Registrant on June 29, 2004, or Form 20-F FY2003). | |||
4.9 | Agreement between the Registrant and Yuchai, dated July 19, 2003 (incorporated herein by reference to the Form 20-F FY2003). | |||
4.10 | Reorganization Agreement between the Company, Coomber and Yuchai, dated April 7, 2005 (incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on April 7, 2005 (File No. 001-13522)). | |||
4.11 | Reorganization Agreement Amendment (No. 1) between the Registrant, Coomber and Yuchai, dated December 2, 2005 (incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on December 6, 2005 (File No. 001-13522)). | |||
4.12 | Reorganization Agreement Amendment (No. 2) between the Registrant, Coomber and Yuchai, dated November 30, 2006 (incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on November 30, 2006 (File No. 001-13522)). | |||
4.13 | Cooperation Agreement among the Registrant, Yuchai, Coomber and Guangxi Yuchai Machinery Group Company Limited, dated June 30, 2007 (incorporated herein by reference to the Current Report on Form 6-K filed by the Registrant on July 5, 2007 (File No. 001-13522)). | |||
8.1 | Subsidiaries of the Registrant. (Filed herewith) | |||
12.1 | Certifications furnished pursuant to Section 302 of the Sarbanes-Oxley Act. (Filed herewith) | |||
13.1 | Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act. (Filed herewith) |
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May 9, 2011
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May 9, 2011
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Note | 31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||||
Continuing operations | ||||||||||||||||||
Sales of goods | 8 | 10,358,124 | 13,139,578 | 16,138,580 | 2,461,500 | |||||||||||||
Rendering of services | 8 | 46,664 | 36,325 | 69,604 | 10,616 | |||||||||||||
Revenue | 8 | 10,404,788 | 13,175,903 | 16,208,184 | 2,472,116 | |||||||||||||
Cost of sales (goods) | (8,328,058 | ) | (10,612,260 | ) | (12,112,215 | ) | (1,847,388 | ) | ||||||||||
Cost of sales (services) | (27,594 | ) | (17,825 | ) | (87,038 | ) | (13,275 | ) | ||||||||||
Gross profit | 2,049,136 | 2,545,818 | 4,008,931 | 611,453 | ||||||||||||||
Other operating income | 9.2a | 28,465 | 93,668 | 129,075 | 19,687 | |||||||||||||
Other operating expenses | 9.2b | (9,005 | ) | (16,113 | ) | (41,447 | ) | (6,322 | ) | |||||||||
Research and development costs | 9.1, 9.3 | (184,794 | ) | (297,259 | ) | (324,123 | ) | (49,436 | ) | |||||||||
Selling, distribution and administrative costs | 9.1 | (1,268,060 | ) | (1,471,857 | ) | (1,822,764 | ) | (278,013 | ) | |||||||||
Operating profit | 615,742 | 854,257 | 1,949,672 | 297,369 | ||||||||||||||
Finance costs | 9.4 | (150,409 | ) | (77,493 | ) | (130,446 | ) | (19,896 | ) | |||||||||
Share of profit of associates | 6 | 2,717 | 2,954 | (121 | ) | (18 | ) | |||||||||||
Share of results of joint ventures | 7 | 13,692 | (16,000 | ) | (53,902 | ) | (8,221 | ) | ||||||||||
Gain on acquisition of Guangxi Yulin Hotel Company in settlement of past loan | 31 | — | 202,950 | — | — | |||||||||||||
Profit before tax from continuing operations | 481,742 | 966,668 | 1,765,203 | 269,234 | ||||||||||||||
Income tax expense | 10 | (110,526 | ) | (147,223 | ) | (327,946 | ) | (50,019 | ) | |||||||||
Profit for the year from continuing operations | 371,216 | 819,445 | 1,437,257 | 219,215 | ||||||||||||||
Discontinued operations | ||||||||||||||||||
(Loss)/profit after tax for the year from discontinued operations | 11 | (33,985 | ) | 13,022 | 12,655 | 1,930 | ||||||||||||
Profit for the year | 337,231 | 832,467 | 1,449,912 | 221,145 | ||||||||||||||
Attributable to: | ||||||||||||||||||
Owners of the Parent | 240,036 | 628,331 | 1,117,297 | 170,413 | ||||||||||||||
Non-controlling interests | 97,195 | 204,136 | 332,615 | 50,732 | ||||||||||||||
337,231 | 832,467 | 1,449,912 | 221,145 | |||||||||||||||
Earnings per share | 12 | |||||||||||||||||
For profit from continuing operations: | ||||||||||||||||||
- basic, profit for the year attributable to ordinary equity holders of the Parent | 7.35 | 16.51 | 29.64 | 4.52 | ||||||||||||||
- diluted, profit for the year attributable to ordinary equity holders of the Parent | 7.35 | 16.51 | 29.64 | 4.52 | ||||||||||||||
For profit for the year: | ||||||||||||||||||
- basic, profit for the year attributable to ordinary equity holders of the Parent | 6.44 | 16.86 | 29.98 | 4.57 | ||||||||||||||
- diluted, profit for the year attributable to ordinary equity holders of the Parent | 6.44 | 16.86 | 29.98 | 4.57 | ||||||||||||||
Weighted average number of shares | ||||||||||||||||||
- basic | 37,267,673 | 37,267,673 | 37,267,673 | 37,267,673 | ||||||||||||||
- diluted | 37,267,673 | 37,267,673 | 37,267,673 | 37,267,673 |
F-4
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31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Profit for the year | 337,231 | 832,467 | 1,449,912 | 221,145 | ||||||||||||
Other comprehensive (loss)/income | ||||||||||||||||
Foreign currency translation | 10,343 | (11,201 | ) | (22,084 | ) | (3,369 | ) | |||||||||
Share of other comprehensive (loss)/ income of associates | (90,265 | ) | 21,038 | — | — | |||||||||||
Others | 4,740 | (647 | ) | — | — | |||||||||||
Other comprehensive (loss)/income for the year, net of tax | (75,182 | ) | 9,190 | (22,084 | ) | (3,369 | ) | |||||||||
Total comprehensive income for the year, net of tax | 262,049 | 841,657 | 1,427,828 | 217,776 | ||||||||||||
Attributable to: | ||||||||||||||||
Owners of the Parent | 151,984 | 640,908 | 1,102,048 | 168,087 | ||||||||||||
Non-controlling interests | 110,065 | 200,749 | 325,780 | 49,689 | ||||||||||||
262,049 | 841,657 | 1,427,828 | 217,776 | |||||||||||||
F-5
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Note | 1.1.2009 | 31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||||
(Restated) | (Restated) | |||||||||||||||||
Assets | ||||||||||||||||||
Non-current assets | ||||||||||||||||||
Property, plant and equipment | 13 | 2,548,736 | 2,975,169 | 3,276,302 | 499,711 | |||||||||||||
Investment properties | 14 | 34,146 | 33,852 | 35,811 | 5,462 | |||||||||||||
Prepaid operating leases | 15 | 159,156 | 355,931 | 407,468 | 62,148 | |||||||||||||
Goodwill | 16 | 212,636 | 212,636 | 212,636 | 32,432 | |||||||||||||
Intangible assets | 17 | — | — | 13,389 | 2,042 | |||||||||||||
Investment in associates | 6 | 328,600 | 39,644 | 38,610 | 5,889 | |||||||||||||
Investment in joint ventures | 7 | 336,016 | 368,025 | 514,313 | 78,444 | |||||||||||||
Other receivables | 18 | 61,475 | 72,183 | 65,533 | 9,995 | |||||||||||||
Deferred tax asset | 10 | 145,233 | 241,718 | 294,934 | 44,984 | |||||||||||||
Other investments | 6,765 | 6,761 | 6,364 | 971 | ||||||||||||||
3,832,763 | 4,305,919 | 4,865,360 | 742,078 | |||||||||||||||
Current assets | ||||||||||||||||||
Inventories | 21 | 2,250,044 | 2,130,026 | 2,632,860 | 401,571 | |||||||||||||
Trade and bills receivables | 23 | 2,538,135 | 2,506,701 | 4,234,475 | 645,854 | |||||||||||||
Prepayments | 150,581 | 97,092 | 107,834 | 16,447 | ||||||||||||||
Other receivables | 24 | 223,686 | 181,550 | 211,126 | 32,202 | |||||||||||||
Income tax recoverable | 46,296 | 6,680 | 3,964 | 604 | ||||||||||||||
Prepaid operating leases | 15 | 6,151 | 7,273 | 11,004 | 1,678 | |||||||||||||
Other current assets | 22 | 96,293 | 91,202 | 118,650 | 18,097 | |||||||||||||
Cash and cash equivalents | 25 | 823,695 | 3,657,981 | 4,060,990 | 619,393 | |||||||||||||
6,134,881 | 8,678,505 | 11,380,903 | 1,735,846 | |||||||||||||||
Assets classified as held for sale | 11 | — | 321,487 | — | — | |||||||||||||
6,134,881 | 8,999,992 | 11,380,903 | 1,735,846 | |||||||||||||||
Total assets | 9,967,644 | 13,305,911 | 16,246,263 | 2,477,924 | ||||||||||||||
Equity and liabilities | ||||||||||||||||||
Equity attributable to owners of the Parent | ||||||||||||||||||
Issued capital | 26 | 1,724,196 | �� | 1,724,196 | 1,724,196 | 262,979 | ||||||||||||
Preference shares | 26 | 36 | 36 | 21 | 3 | |||||||||||||
Statutory reserves | 28 | 287,473 | 291,686 | 292,064 | 44,546 | |||||||||||||
Capital reserves | 2,942 | 2,942 | 2,932 | 447 | ||||||||||||||
Retained earnings | 1,527,006 | 2,125,059 | 3,178,910 | 484,856 | ||||||||||||||
Other components of equity | (96,473 | ) | (84,927 | ) | (100,176 | ) | (15,279 | ) | ||||||||||
Reserve of asset classified as held for sale | — | (9,661 | ) | — | — | |||||||||||||
Equity attributable to owners of the Parent | 3,445,180 | 4,049,331 | 5,097,947 | 777,552 | ||||||||||||||
Non-controlling interests | 1,169,779 | 1,360,459 | 1,687,980 | 257,455 | ||||||||||||||
Total equity | 4,614,959 | 5,409,790 | 6,785,927 | 1,035,007 | ||||||||||||||
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Note | 1.1.2009 | 31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||||||
Restated | Restated | |||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||||
Non-current liabilities | ||||||||||||||||||
Interest-bearing loans and borrowings | 19(b) | 176,756 | 411,875 | 201,850 | 30,787 | |||||||||||||
Other liabilities | 19(a) | 2,080 | 26,877 | 18,869 | 2,878 | |||||||||||||
Deferred tax liability | 10 | 16,158 | 31,840 | 77,274 | 11,786 | |||||||||||||
Deferred grants | 20 | — | 176,035 | 269,736 | 41,141 | |||||||||||||
194,994 | 646,627 | 567,729 | 86,592 | |||||||||||||||
Current liabilities | ||||||||||||||||||
Trade and other payables | 29 | 3,604,128 | 6,190,246 | 7,902,317 | 1,205,283 | |||||||||||||
Interest-bearing loans and borrowings | 19(b) | 1,148,732 | 667,173 | 423,543 | 64,600 | |||||||||||||
Provision for taxation | 13,277 | 122,308 | 204,850 | 31,245 | ||||||||||||||
Other liabilities | 19(a) | 5 | 10,233 | 9,743 | 1,486 | |||||||||||||
Provision for product warranty | 30 | 188,599 | 259,534 | 352,154 | 53,711 | |||||||||||||
Deferred gain | 31 | 202,950 | — | — | — | |||||||||||||
5,157,691 | 7,249,494 | 8,892,607 | 1,356,325 | |||||||||||||||
Total liabilities | 5,352,685 | 7,896,121 | 9,460,336 | 1,442,917 | ||||||||||||||
Total equity and liabilities | 9,967,644 | 13,305,911 | 16,246,263 | 2,477,924 | ||||||||||||||
F-7
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Attributable to the equity holders of the parent | ||||||||||||||||||||||||||||||||||||||||||||
Foreign | Per- | |||||||||||||||||||||||||||||||||||||||||||
Issued | Preference | Statutory | currency | Revaluation | formance | Non- | ||||||||||||||||||||||||||||||||||||||
capital | shares | reserves | Capital | Retained | translation | reserve | shares | controlling | Total | |||||||||||||||||||||||||||||||||||
(Note 26) | (Note 26) | (Note 28) | reserves | earnings | reserve | (Note i) | reserve | Total | interests | equity | ||||||||||||||||||||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||||||||||||||||||||||||||
At January 1, 2008 | 1,724,196 | 36 | 270,339 | 3,297 | 1,314,591 | (65,915 | ) | 54,950 | 2,547 | 3,304,041 | 1,035,833 | 4,339,874 | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 240,036 | — | — | — | 240,036 | 97,195 | 337,231 | |||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | (355 | ) | 358 | (9,302 | ) | (78,767 | ) | 14 | (88,052 | ) | 12,870 | (75,182 | ) | ||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | (355 | ) | 240,394 | (9,302 | ) | (78,767 | ) | 14 | 151,984 | 110,065 | 262,049 | ||||||||||||||||||||||||||||||
Transfer to statutory reserves | — | — | 17,134 | — | (2,093 | ) | — | — | — | 15,041 | — | 15,041 | ||||||||||||||||||||||||||||||||
Dividends paid to non-controlling interests of subsidiaries | — | — | — | — | — | — | — | — | — | (33,473 | ) | (33,473 | ) | |||||||||||||||||||||||||||||||
Dividends declared (US$0.10 per share) (Note 27) | — | — | — | — | (25,886 | ) | — | — | — | (25,886 | ) | — | (25,886 | ) | ||||||||||||||||||||||||||||||
Non-controlling interests arising from incorporation of new subsidiaries | — | — | — | — | — | — | — | — | — | 57,354 | 57,354 | |||||||||||||||||||||||||||||||||
At December 31,2008 | 1,724,196 | 36 | 287,473 | 2,942 | 1,527,006 | (75,217 | ) | (23,817 | ) | 2,561 | 3,445,180 | 1,169,779 | 4,614,959 | |||||||||||||||||||||||||||||||
F-8
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Attributable to the equity holders of the parent | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Premium | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve of | paid for | |||||||||||||||||||||||||||||||||||||||||||||||||||
asset | Foreign | Per- | acquisition | |||||||||||||||||||||||||||||||||||||||||||||||||
Issued | Preference | Statutory | classified as | currency | Revaluation | formance | of non- | Non- | ||||||||||||||||||||||||||||||||||||||||||||
capital | shares | reserves | Capital | Retained | held for sale | translation | reserve | shares | controlling | controlling | Total | |||||||||||||||||||||||||||||||||||||||||
(Note 26) | (Note 26) | (Note 28) | reserves | earnings | (Note 11) | reserve | (Note i) | reserve | interests | Total | interests | equity | ||||||||||||||||||||||||||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||||||||||||||||||||||||||||||||
At January 1, 2009 | 1,724,196 | 36 | 287,473 | 2,942 | 1,527,006 | — | (75,217 | ) | (23,817 | ) | 2,561 | — | 3,445,180 | 1,169,779 | 4,614,959 | |||||||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 628,331 | — | — | — | — | — | 628,331 | 204,136 | 832,467 | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | (10,870 | ) | 23,447 | — | — | 12,577 | (3,387 | ) | 9,190 | |||||||||||||||||||||||||||||||||||||
Total comprehensive income for the year | — | — | — | — | 628,331 | — | (10,870 | ) | 23,447 | — | — | 640,908 | 200,749 | 841,657 | ||||||||||||||||||||||||||||||||||||||
Transfer to statutory reserves | — | — | 4,821 | — | (4,821 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
Dividends paid to non-controlling interests of subsidiaries | — | — | — | — | — | — | — | — | — | — | — | (27,988 | ) | (27,988 | ) | |||||||||||||||||||||||||||||||||||||
Dividends declared (US$0.10 per share) (Note 27) | — | — | — | — | (25,457 | ) | — | — | — | — | — | (25,457 | ) | — | (25,457 | ) | ||||||||||||||||||||||||||||||||||||
Liquidation of subsidiaries | — | — | (608 | ) | — | — | — | — | — | — | — | (608 | ) | — | (608 | ) | ||||||||||||||||||||||||||||||||||||
Non-controlling interests arising from increase in share capital of subsidiaries | — | — | — | — | — | — | — | — | — | — | — | 37,225 | 37,225 | |||||||||||||||||||||||||||||||||||||||
Acquisition of non-controlling interests | — | — | — | — | — | — | — | — | — | — | — | (19,306 | ) | (19,306 | ) | |||||||||||||||||||||||||||||||||||||
Premium paid on acquisition of non-controlling interests | — | — | — | — | — | — | — | — | — | (10,692 | ) | (10,692 | ) | — | (10,692 | ) | ||||||||||||||||||||||||||||||||||||
Reserve attributable to asset classified as held for sale | — | — | — | — | — | (9,661 | ) | 11,937 | 370 | (2,646 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
At December 31, 2009 | 1,724,196 | 36 | 291,686 | 2,942 | 2,125,059 | (9,661 | ) | (74,150 | ) | — | (85 | ) | (10,692 | ) | 4,049,331 | 1,360,459 | 5,409,790 | |||||||||||||||||||||||||||||||||||
Note (i): | The revaluation reserve arises from the changes in the net fair value of investment in Thakral Corporation Limited (an associate of the Group). |
F-9
Table of Contents
Attributable to the equity holders of the parent | ||||||||||||||||||||||||||||||||||||||||||||||||
Premium paid | ||||||||||||||||||||||||||||||||||||||||||||||||
Reserve of | for | |||||||||||||||||||||||||||||||||||||||||||||||
asset | Foreign | Per- | acquisition | |||||||||||||||||||||||||||||||||||||||||||||
Issued | Preference | Statutory | classified as | currency | formance | of non- | Non- | |||||||||||||||||||||||||||||||||||||||||
capital | shares | reserves | Capital | Retained | held for sale | translation | shares | controlling | controlling | Total | ||||||||||||||||||||||||||||||||||||||
(Note 26) | (Note 26) | (Note 28) | reserves | earnings | (Note 11) | reserve | reserve | interests | Total | interests | equity | |||||||||||||||||||||||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | |||||||||||||||||||||||||||||||||||||
At January 1, 2010 | 1,724,196 | 36 | 291,686 | 2,942 | 2,125,059 | (9,661 | ) | (74,150 | ) | (85 | ) | (10,692 | ) | 4,049,331 | 1,360,459 | 5,409,790 | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 1,117,297 | — | — | — | — | 1,117,297 | 332,615 | 1,449,912 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | (15,249 | ) | — | — | (15,249 | ) | (6,835 | ) | (22,084 | ) | ||||||||||||||||||||||||||||||||
Total comprehensive income for the year | — | — | — | — | 1,117,297 | — | (15,249 | ) | — | — | 1,102,048 | 325,780 | 1,427,828 | |||||||||||||||||||||||||||||||||||
Transfer to statutory reserves | — | — | 378 | — | (378 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Dividends paid to non-controlling interests of subsidiaries | — | — | — | — | — | — | — | — | — | — | (44,631 | ) | (44,631 | ) | ||||||||||||||||||||||||||||||||||
Dividends declared (US$0.25 per share) (Note 27) | — | — | — | — | (63,078 | ) | — | — | — | — | (63,078 | ) | — | (63,078 | ) | |||||||||||||||||||||||||||||||||
Liquidation of subsidiaries | — | — | — | (10 | ) | 10 | — | — | — | — | — | (2,943 | ) | (2,943 | ) | |||||||||||||||||||||||||||||||||
Non-controlling interests arising from increase in share capital of subsidiaries | — | — | — | — | — | — | — | — | — | — | 48,000 | 48,000 | ||||||||||||||||||||||||||||||||||||
Conversion of NCCPS | — | (15 | ) | — | — | — | — | — | — | — | (15 | ) | 15 | — | ||||||||||||||||||||||||||||||||||
Conversion of RCPS B | — | — | — | — | — | — | — | — | — | — | 1,300 | 1,300 | ||||||||||||||||||||||||||||||||||||
Realization of reserves upon disposal of asset classified as held for sale | — | — | — | — | — | 9,661 | — | — | — | 9,661 | — | 9,661 | ||||||||||||||||||||||||||||||||||||
At December 31, 2010 | 1,724,196 | 21 | 292,064 | 2,932 | 3,178,910 | — | (89,399 | ) | (85 | ) | (10,692 | ) | 5,097,947 | 1,687,980 | 6,785,927 | |||||||||||||||||||||||||||||||||
US$ | 262,979 | 3 | 44,546 | 447 | 484,856 | — | (13,635 | ) | (13 | ) | (1,631 | ) | 777,552 | 257,455 | 1,035,007 | |||||||||||||||||||||||||||||||||
F-10
Table of Contents
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Operating activities | ||||||||||||||||
Profit before tax from continuing operations | 481,742 | 966,668 | 1,765,203 | 269,234 | ||||||||||||
(Loss) / profit before tax from discontinued operations | (33,731 | ) | 14,321 | 12,655 | 1,930 | |||||||||||
Profit before tax, total | 448,011 | 980,989 | 1,777,858 | 271,164 | ||||||||||||
Non-cash adjustment to reconcile profit before tax to net cash flows | ||||||||||||||||
Gain on acquisition of Guangxi Yulin Hotel Company in settlement of past loan | — | (202,950 | ) | — | — | |||||||||||
Allowance for doubtful debts made/(written back) (net) | 25,349 | (41,162 | ) | (21,725 | ) | (3,314 | ) | |||||||||
Allowance for stock obsolescence made/(written back) (net) | 52,747 | 154,700 | (111,763 | ) | (17,046 | ) | ||||||||||
Depreciation of property, plant and equipment and investment properties | 265,834 | 277,332 | 275,136 | 41,964 | ||||||||||||
Amortization of prepaid operating leases | 6,794 | 7,982 | 11,004 | 1,678 | ||||||||||||
Dividend income from associates | — | (11,162 | ) | — | — | |||||||||||
Impairment of property, plant and equipment and prepaid operating leases | 69,930 | 7,785 | 1,372 | 209 | ||||||||||||
Write off of property, plant & equipment | 912 | 5,723 | 2,447 | 373 | ||||||||||||
Write (back) / off of trade and other payables | (869 | ) | (23,649 | ) | 5,249 | 801 | ||||||||||
Write back of provision for impairment of receivables-Malkn | — | (4,895 | ) | — | — | |||||||||||
Write back of impairment of investment in joint ventures | — | — | (10,936 | ) | (1,668 | ) | ||||||||||
Impairment of goodwill | 5,675 | — | — | — | ||||||||||||
Share of net (profit) / loss of associates and joint ventures | (16,409 | ) | 13,046 | 54,023 | 8,239 | |||||||||||
Loss on other investments | 153 | — | — | — | ||||||||||||
Negative goodwill | (12,368 | ) | — | — | — | |||||||||||
Exchange loss / (gain) on financing activities | 3,172 | 6,543 | (19,975 | ) | (3,047 | ) | ||||||||||
Loss on disposal of property, plant and equipment | 3,525 | 8,618 | 33,670 | 5,135 | ||||||||||||
Gain on disposal of associates | — | (1,906 | ) | (707 | ) | (108 | ) | |||||||||
Gain on disposal of a subsidiary | — | — | (2,833 | ) | (432 | ) | ||||||||||
Tax refund on reinvestment of net foreign dividend | (2,440 | ) | — | — | — | |||||||||||
Loss on disposal of other investment | — | — | 261 | 40 | ||||||||||||
Finance costs | 150,409 | 77,493 | 130,446 | 19,896 | ||||||||||||
Interest income | (15,228 | ) | (31,576 | ) | (61,719 | ) | (9,414 | ) | ||||||||
Profit from discontinued operations | 33,985 | (13,022 | ) | (12,655 | ) | (1,930 | ) | |||||||||
Fair value gain on held for trading investment securities | — | — | (17,123 | ) | (2,612 | ) | ||||||||||
Changes in working capital | ||||||||||||||||
Increase in inventories | (653,827 | ) | (49,006 | ) | (409,118 | ) | (62,401 | ) | ||||||||
Decrease / (increase) in trade and other receivables | 338,716 | 290,601 | (1,762,932 | ) | (268,887 | ) | ||||||||||
Increase in trade and other payables | 3,064 | 2,565,933 | 1,739,923 | 265,380 | ||||||||||||
Decrease in balances with related parties | 89,591 | 24,953 | 90,243 | 13,764 | ||||||||||||
(Decrease) / increase in balances with holding company | (3,577 | ) | 2,022 | (8,406 | ) | (1,282 | ) | |||||||||
Decrease in development properties | 4,816 | 5,393 | 33,747 | 5,147 | ||||||||||||
Income taxes paid | (100,785 | ) | (80,427 | ) | (250,523 | ) | (38,209 | ) | ||||||||
Net cash flows from operating activities | 697,180 | 3,969,358 | 1,464,964 | 223,440 | ||||||||||||
F-11
Table of Contents
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Investing activities | ||||||||||||||||
Acquisition/additional investment in subsidiaries, net of cash acquired | (11,624 | ) | — | — | — | |||||||||||
Acquisition/additional investment in associates & joint ventures | (1,069 | ) | (69,400 | ) | (191,906 | ) | (29,270 | ) | ||||||||
Dividends received from associates | — | 16,931 | — | — | ||||||||||||
Dividends received from joint ventures | 10,476 | 19,122 | 1,733 | 264 | ||||||||||||
Interest received | 88,487 | 31,578 | 61,719 | 9,414 | ||||||||||||
Purchase of other investments | — | (82 | ) | — | — | |||||||||||
Proceeds from disposal of other investments | — | — | 169 | 26 | ||||||||||||
Payment for prepaid operating leases | — | (205,879 | ) | (66,300 | ) | (10,113 | ) | |||||||||
Additions of intangible asset | — | — | (13,389 | ) | (2,042 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | 37,789 | 64,745 | 30,410 | 4,638 | ||||||||||||
Purchase of property, plant and equipment and construction in progress (includes interest capitalized) | (376,440 | ) | (780,836 | ) | (629,626 | ) | (96,032 | ) | ||||||||
Proceeds from disposal of a subsidiary, net of cash | 2,440 | — | 1,902 | 290 | ||||||||||||
Proceeds from disposal of assets classified as held for sale | — | — | 302,655 | 46,162 | ||||||||||||
Proceeds from disposal of associates | — | 1,906 | 4,000 | 610 | ||||||||||||
Acquisition of a non-controlling interests | — | (29,998 | ) | — | — | |||||||||||
Proceeds from redemption of preference shares in an associate | — | 551 | — | — | ||||||||||||
Proceeds from government grants | 31,514 | 150,917 | 112,592 | 17,173 | ||||||||||||
Net cash flows used in investing activities | (218,427 | ) | (800,445 | ) | (386,041 | ) | (58,880 | ) | ||||||||
Financing activities | ||||||||||||||||
Dividends paid to non-controlling interests | (33,473 | ) | (27,988 | ) | (44,631 | ) | (6,807 | ) | ||||||||
Dividends paid to equity holders of the parent | (25,886 | ) | (25,457 | ) | (63,078 | ) | (9,621 | ) | ||||||||
Interest paid | (194,579 | ) | (93,433 | ) | (146,014 | ) | (22,270 | ) | ||||||||
Payment of finance lease liabilities | — | (5,014 | ) | (7,240 | ) | (1,104 | ) | |||||||||
Proceeds from borrowings | 1,093,528 | 998,402 | 472,620 | 72,085 | ||||||||||||
Repayment of borrowings | (1,287,397 | ) | (1,256,441 | ) | (926,275 | ) | (141,278 | ) | ||||||||
Capital contributions from non-controlling interests | 49,231 | 37,225 | 48,000 | 7,321 | ||||||||||||
Fixed deposits pledged with banks for banking facilities | 5 | (19 | ) | (10 | ) | (2 | ) | |||||||||
Proceeds from sale and leaseback arrangement | — | 40,000 | — | — | ||||||||||||
Net cash flows used in financing activities | (398,571 | ) | (332,725 | ) | (666,628 | ) | (101,676 | ) | ||||||||
F-12
Table of Contents
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Net increase in cash and cash equivalents | 80,182 | 2,836,188 | 412,295 | 62,884 | ||||||||||||
Cash and cash equivalents at 1 January | 759,837 | 823,695 | 3,657,981 | 557,925 | ||||||||||||
Effect of exchange rate changes on balances in foreign currencies | (16,324 | ) | (1,902 | ) | (9,286 | ) | (1,416 | ) | ||||||||
Cash and cash equivalents at 31 December | 823,695 | 3,657,981 | 4,060,990 | 619,393 | ||||||||||||
F-13
Table of Contents
1. | Corporate information |
F-14
Table of Contents
1. | Corporate information (cont’d) |
F-15
Table of Contents
1. | Corporate information (cont’d) |
F-16
Table of Contents
2. | Basis of preparation and accounting policies |
2.1 | Basis of preparation |
2.2 | Summary of significant accounting policies | |
Basis of consolidation | ||
Basis of consolidation from January 1, 2010 |
• | Derecognises the assets (including goodwill) and liabilities of the subsidiary | ||
• | Derecognises the carrying amount of any non-controlling interest | ||
• | Derecognises the cumulative translation differences, recorded in equity | ||
• | Recognises the fair value of the consideration received | ||
• | Recognises the fair value of any investment retained | ||
• | Recognises any surplus or deficit in profit or loss | ||
• | Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate. |
F-17
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) | |
Basis of consolidation (cont’d) | ||
Basis of consolidation prior to January 1, 2010 |
• | Acquisitions of non-controlling interests, prior to 1 January 2010, were accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired were recognised in goodwill. | ||
• | Losses incurred by the Group were attributed to the non-controlling interest (“NCI”) until the balance was reduced to nil. Any further excess losses were attributed to the parent, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 January 2010 were not reallocated between NCI and the parent shareholders. | ||
• | Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost. The carrying value of such investments at 1 January 2010 has not been restated. | ||
(a) | Business combinations and goodwill |
F-18
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) | |
Basis of consolidation (cont’d) |
(a) | Business combinations and goodwill (cont’d) | ||
Business combinations from 1 January 2010 (cont’d) |
F-19
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(b) | Investments in associates |
F-20
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(c) | Investments in joint ventures |
F-21
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(d) | Non-current assets held for sale and discontinued operations |
(e) | Foreign currency translation | ||
The Company’s functional currency is US dollar. The Group’s consolidated financial statements are presented in Renminbi (Rmb), which is also the functional currency of Yuchai, the largest operating segment of the Group. | |||
Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. | |||
Transactions and balances | |||
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. | |||
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. | |||
All differences are taken to the income statement with the exception of all monetary items that provide an effective hedge for a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are recognised in the income statement. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income. | |||
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. |
F-22
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(e) | Foreign currency translation (cont’d) | ||
Group companies | |||
The assets and liabilities of the Company and its subsidiaries whose functional currency is not Rmb are translated into Rmb at the rate of exchange prevailing at the reporting date and their income statements are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement. | |||
For the US dollar convenience translation amounts included in the accompanying consolidated financial statements, the Rmb equivalent amounts have been translated into US dollars at the rate of Rmb 6.5564 = US$1.00, the rate quoted by the People’s Bank of China (“PBOC”) at the close of business on March 31, 2011. No representation is made that the Rmb amounts could have been, or could be, converted into US dollars at that rate or at any other rate prevailing on March 31, 2011 or any other date. | |||
(f) | Revenue recognition | ||
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding discounts, rebates, taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised: | |||
Sale of goods | |||
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. |
F-23
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(f) | Revenue recognition (cont’d) | ||
Rendering of services | |||
Revenue from rendering of services relates to project management contracts and hotel room and restaurant operations. Revenue is recognised over the period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be performed. | |||
Guarantee fee income | |||
Guarantee fees received or receivable for a guarantee issued are recorded in “Accrued expenses and other liabilities” based upon the estimated fair value at the inception of such guarantee obligations, and are recognised as revenue on a straight line basis over the respective terms of the guarantees. | |||
Interest income | |||
For all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement. | |||
Rental income | |||
Rental income receivable under operating leases is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income to be received. Contingent rentals are recognised as income in the accounting period in which they are earned. | |||
Dividends | |||
Dividend income from unquoted investments is recognised when the Group’s right to receive payment is established. | |||
Dividend income from quoted investments is recognised when dividends are received. |
F-24
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(g) | Taxes | ||
Current income tax | |||
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income. | |||
Current income tax relating to items recognised directly in consolidated statement of comprehensive income is recognised in consolidated statement of comprehensive income and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. | |||
Deferred tax | |||
Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. | |||
Deferred tax liabilities are recognised for all taxable temporary differences, except: |
• | Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and |
• | In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. |
• | Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and | ||
• | In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. |
F-25
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(g) | Taxes (cont’d) | ||
Deferred tax (cont’d) | |||
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. | |||
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. | |||
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. | |||
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. | |||
Sales tax | |||
Revenues, expenses and assets are recognised net of the amount of sales tax except: |
• | Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and |
• | Receivables and payables that are stated with the amount of sales tax included. |
(h) | Government grants | ||
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset. | |||
Where the Group receives non-monetary grants, the asset and the grant are recorded at nominal amounts and released to the income statement over the expected useful life of the relevant asset by equal annual installments. |
F-26
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(i) | Pensions and other post employment benefits | ||
The Group participates in and makes contributions to the national pension schemes as defined by the laws of the countries in which it has operations. The contributions are at a fixed proportion of the basic salary of the staff. Contributions are recognised as compensation expense in the period in which the related services are performed. | |||
(j) | Financial instruments — initial recognition and subsequent measurement | ||
Financial assets | |||
Initial recognition and measurement | |||
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. | |||
All financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. | |||
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. | |||
The Group’s financial assets include cash and short-term deposits, trade and other receivables, loan and other receivables, quoted and unquoted financial instruments, and derivative financial instruments. | |||
Subsequent measurement | |||
The subsequent measurement of financial assets depends on their classification as follows: | |||
Financial assets at fair value through profit or loss | |||
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with changes in fair value recognised in finance income or finance cost in the income statement. |
F-27
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(j) | Financial instruments — initial recognition and subsequent measurement (cont’d) | ||
Financial assets (cont’d) | |||
Subsequent measurement (cont’d) | |||
Financial assets at fair value through profit or loss (cont’d) | |||
The Group has designated its remaining 12.2% shareholding interest in Thakral Corporation Ltd. (“TCL”) as financial assets at fair value through profit or loss. | |||
The Group evaluated its financial assets held for trading, other than derivatives, to determine whether the intention to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s intention to sell them in the foreseeable future significantly changes, the Group may elect to reclassify these financial assets in rare circumstances. The reclassification to loans and receivables, available-for-sale or held to maturity depends on the nature of the asset. This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation. | |||
Loans and receivables | |||
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. | |||
The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance costs. | |||
Held-to-maturity investments | |||
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold it to maturity. After initial measurement, held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance costs. | |||
The Group did not have any held-to-maturity investments during the years ended December 31, 2010 and 2009. |
F-28
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(j) | Financial instruments — initial recognition and subsequent measurement (cont’d) | ||
Financial assets (cont’d) | |||
Available-for-sale financial investments | |||
Available-for-sale financial investments include equity and debt securities. Equity investments classified as available-for sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions. | |||
After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the income statement in finance costs and removed from the available-for-sale reserve. | |||
The Group evaluated its available-for-sale financial assets whether the ability and intention to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to—maturity category is permitted only when the entity has the ability and intention to hold until the financial asset accordingly. | |||
For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement. | |||
Derecognition | |||
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when: |
• | The rights to receive cash flows from the asset have expired |
• | The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. |
F-29
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(j) | Financial instruments — initial recognition and subsequent measurement (cont’d) | ||
Financial assets (cont’d) | |||
Derecognition (cont’d) | |||
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. | |||
In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. | |||
Continuing involvement that takes the form of a guarantee over the transferred asset, is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. | |||
Impairment of financial assets | |||
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. | |||
Financial assets carried at amortised cost | |||
For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. |
F-30
Table of Contents
2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(j) | Financial instruments — initial recognition and subsequent measurement (cont’d) | ||
Impairment of financial assets (cont’d) | |||
Financial assets carried at amortised cost (cont’d) | |||
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. | |||
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the income statement. | |||
Available-for-sale financial investments | |||
For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. | |||
In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement — is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairment are recognised directly in other comprehensive income. | |||
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(j) | Financial instruments — initial recognition and subsequent measurement (cont’d) | ||
Impairment of financial assets (cont’d) | |||
Available-for-sale financial investments (cont’d) | |||
Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement. | |||
Financial liabilities | |||
Initial recognition and measurement | |||
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. | |||
All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs. | |||
The Group’s financial liabilities include trade and other payables, loans and borrowings and financial guarantee contracts. | |||
Subsequent measurement | |||
The measurement of financial liabilities depends on their classification as follows: | |||
Financial liabilities at fair value through profit or loss | |||
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. | |||
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. | |||
Gains or losses on liabilities held for trading are recognised in the income statement. | |||
The Group has not designated any financial liabilities upon initial recognition as at fair value through profit or loss. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(j) | Financial instruments — initial recognition and subsequent measurement (cont’d) |
Financial liabilities (cont’d) |
Subsequent measurement (cont’d) | |||
Loans and borrowings |
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process. |
Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement. | |||
Intra-group financial guarantees |
Financial guarantees are financial instruments issued by the Group to its subsidiaries that requires the issuer to make specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees issued to by the group to its subsidiaries are eliminated in full on consolidation. |
Financial guarantees are recognised initially at fair value and are classified as financial liabilities. Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantees is transferred to the income statement. | |||
Derecognition |
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. |
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement. |
Offsetting of financial instruments |
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(j) | Financial instruments — initial recognition and subsequent measurement (cont’d) |
Fair value of financial instruments |
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. |
For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models. |
An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 37. | |||
(k) | Property, plant and equipment |
Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the income statement as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. |
Freehold land has an unlimited useful life and therefore is not depreciated. Asset under construction included in plant and equipment are not depreciated as these assets are not yet available for use. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: |
Freehold buildings | : | 50 years | ||
Leasehold land, buildings and improvements | : | Shorter of 15 to 50 years or lease term | ||
Plant and machinery | : | 3 to 20 years | ||
Office furniture, fittings and equipment | : | 3 to 20 years | ||
Motor and transport vehicles | : | 3.5 to 6 years |
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(k) | Property, plant and equipment (cont’d) |
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised. |
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate. |
The Group capitalizes interest with respect to major assets under installation or construction based on the weighted average cost of the Group’s general borrowings and actual interest incurred for specific borrowings. Repairs and maintenance of a routine nature are expensed while those that extend the life of assets are capitalized. |
Construction in progress represents factories under construction and machinery and equipment pending installation. All direct costs relating to the acquisition or construction of buildings and machinery and equipment, including interest charges on borrowings, are capitalised as construction in progress. | |||
(l) | Leases |
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. | |||
Prepaid operating lease |
Prepaid operating lease represents payments made to the PRC land bureau for land use rights, which are charged to expense on a straight-line basis over the respective periods of the rights which are in the range of 15 to 50 years. | |||
Group as a lessee |
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the income statement. |
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. |
Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(l) | Leases (cont’d) | ||
Sale and leaseback |
In accordance with IAS 17,Leases, the gain or loss on sale and operating leaseback transactions is recognised in the consolidated income statement immediately if (i) the Group does not maintain or maintains only minor continuing involvement in these properties, other than the required lease payments and (ii) these transactions occur at fair value. Any gain or loss on sale and finance leaseback transactions is deferred and amortized over the term of the lease. | |||
Group as a lessor |
Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents are recognised as revenue in the period in which they are earned. | |||
(m) | Borrowing costs |
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. |
A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. To the extent that funds are borrowed specifically for the purpose of obtaining the asset, the amount of borrowing costs eligible for capitalization should be determined as the actual borrowing costs incurred less any investment income on the temporary investment of those borrowings. To the extent that funds are borrowed generally and used for the purpose of obtaining the asset, the amount of borrowing costs eligible for capitalization is by applying a capitalization rate to the expenditures on that asset. The capitalization rate should be the weighted average of the borrowing costs applicable to the borrowings of the enterprise that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalized during a period should not exceed the amount of borrowing costs incurred during that period. |
The Group capitalises borrowing costs for all eligible assets where construction was commenced on or after 1 January 2008. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(n) | Research and development expenses |
Research costs are expensed as incurred. The Group received research and development subsidies of Rmb 43,610 and Rmb 46,080 (US$7,028) for the years ended December 31, 2009 and 2010 respectively. |
The subsidies received are recognised as deferred income and net off against research and development expenses when earned. |
Development expenditures, on an individual project, are recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete, and the ability to measure reliably the expenditures during development. |
Capitalised development expenditures are stated at cost less accumulated amortisation and impairment losses. As of December 31, 2010, capitalised development expenditures are not amortized because the intangible asset has not been completed and available for use or sale. | |||
(o) | Inventories |
Inventories are valued at the lower of cost and net realisable value. |
Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of production overheads based on normal operating capacity. |
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. | |||
(p) | Impairment of non-financial assets |
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(p) | Impairment of non-financial assets (cont’d) |
Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset. |
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. |
Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate that the carrying value may be impaired. |
Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. | |||
(q) | Cash and cash equivalents |
Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less. |
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short- term deposits as defined above, net of outstanding bank overdrafts. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(r) | Provisions | ||
General |
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. | |||
Product warranty |
The Group recognises a liability at the time the product is sold, for the estimated future costs to be incurred under the lower of a warranty period or warranty mileage on various engine models, on which the Group provides free repair and replacement. Warranties extend for a duration (generally 12 months to 24 months) or mileage (generally 80,000 kilometers to 250,000 kilometers), whichever is the lower. Provisions for warranty are primarily determined based on historical warranty cost per unit of engines sold adjusted for specific conditions that may arise and the number of engines under warranty at each financial year. In previous years, warranty claims have typically not been higher than the relevant provisions made in our consolidated statement of financial position. If the nature, frequency and average cost of warranty claims change, the accrued liability for product warranty will be adjusted accordingly. | |||
(s) | Convertible preference shares |
Convertible preference shares are separated into liability and equity components based on the terms of the contract. |
On issuance of the convertible preference shares, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption. |
The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity. Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent years. |
Transaction costs are apportioned between the liability and equity components of the convertible preference shares based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised. |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(t) | Investment properties |
Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at historic cost less provisions for depreciation and impairment. Disclosures about the cost basis and depreciation rates are disclosed in Note 2.2 (k). |
Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. |
The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of derecognition. |
Transfers are made to or from investment property only when there is a change in use. | |||
(u) | Development properties |
Development properties are those properties which are held with the intention of development and sale in the ordinary course of business. They are stated at the lower of cost plus, where appropriate, apportion of attributable profit, and estimated net realizable value, net of progress billings. Net realizable value represents the estimated selling price less costs to be incurred in the selling the properties. |
The cost of properties under development comprise specifically identified costs, including acquisition costs, development expenditure, borrowing costs and other related expenditure. Borrowing costs payable on loans funding a development property are also capitalized, on a specific identification basis, as part of the costs of the development property until the completion of development. | |||
(v) | Related parties |
A party is considered to be related to the Group if: |
(a) | The party, directly or indirectly through one or more intermediaries, |
(i) | controls, is controlled by, or is under common control with, the Group; |
(ii) | has an interest in the Group that gives it significant influence over the Group; or |
(iii) | has joint control over the Group; |
(b) | The party is an associate; |
(c) | The party is a jointly-controlled entity; |
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2. | Basis of preparation and accounting policies (cont’d) | |
2.2 | Summary of significant accounting policies (cont’d) |
(v) | Related parties (cont’d) |
(d) | The party is a member of the key management personnel of the Group or its parent; |
(e) | The party is a close member of the family of any individual referred to in (a) or (d); or |
(f) | The party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or |
(g) | The party is a post-employment benefit plan for the benefit of the employees of the Group, or of any entity that is a related party of the Group. |
2.3 | Changes in accounting policy and disclosures | |
New and amended standards and interpretations | ||
The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations effective as of January 1, 2010: |
• | IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) effective July 1, 2009, including consequential amendments to IFRS 2, IFRS 5 IFRS 7, IAS 7, IAS 21, IAS 28, IAS 31 and IAS 39 | ||
• | Improvements to IFRSs (May 2008) | ||
• | Improvements to IFRSs (April 2009) |
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2 | Basis of preparation and accounting policies (cont’d) | |
2.3 | Changes in accounting policy and disclosures (cont’d) | |
The adoption of the standards or interpretations is described below: | ||
IFRS 3Business Combinations (Revised)and IAS 27Consolidated and Separate Financial Statements (Amended) |
• | IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that when a subsidiary is classified as held for sale, all its assets and liabilities are classified as held for sale, even when the entity remains a non-controlling interest after the sale transaction. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Group. |
• | IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in IFRS 5. The disclosure requirements of other IFRSs only apply if specifically required for such non-current assets or discontinued operations. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Group. | ||
• | IFRS 8 Operating Segments: clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. As the Group’s chief operating decision maker does review segment assets and liabilities, the Group has continued to disclose this information in Note 34. |
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2 | Basis of preparation and accounting policies (cont’d) | |
2.3 | Changes in accounting policy and disclosures (cont’d) | |
Issued in April 2009 (cont’d) |
• | IAS 7 Statement of Cash Flows: States that only expenditure that results in recognising an asset can be classified as a cash flow from investing activities. | ||
• | IAS 36 Impairment of Assets: The amendment clarifies that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in IFRS 8 before aggregation for reporting purposes. The amendment has no impact on the Group as the annual impairment test is performed before aggregation. |
• | IFRS 2 Share-based Payment | ||
• | IAS 1 Presentation of Financial Statements | ||
• | IAS 17 Leases | ||
• | IAS 38 Intangible Assets | ||
• | IAS 39 Financial Instruments: Recognition and MeasurementIFRIC 9 Reassessment of Embedded Derivatives | ||
• | IFRIC 16 Hedge of a Net Investment in a Foreign Operation |
• | IFRS 1 First-time adoption of IFRS | ||
• | IFRS 2 Share-based Payment | ||
• | IAS 32 Financial Instruments: Presentation | ||
• | IAS 39 Financial instruments: Recognition and Measurement | ||
• | IFRIC 16 Hedges of a net investment in a Foreign Operation | ||
• | IFRIC 17 Distribution of Non-cash assets to Owners | ||
• | IFRIC 18 Transfers of Assets from Customers |
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2 | Basis of preparation and accounting policies (cont’d) | |
2.4 | Standards issued but not yet effective |
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2 | Basis of preparation and accounting policies (cont’d) | |
2.4 | Standards issued but not yet effective (cont’d) | |
IFRS 9Financial Instruments: Classification and Measurement |
• | IFRS 3 Business Combinations | ||
• | IFRS 7 Financial Instruments: Disclosures | ||
• | IAS 1 Presentation of Financial Statements | ||
• | IAS 27 Consolidated and Separate Financial Statements | ||
• | IFRIC 13 Customer Loyalty Programmes |
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3. | Significant accounting judgments, estimates and assumptions |
3.1 | Judgments |
3.2 | Estimates and assumptions |
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3. | Significant accounting judgments, estimates and assumptions (cont’d) | |
3.2 | Estimates and assumptions (cont’d) | |
Impairment of property, plant and equipment (cont’d) |
• | Property, plants and equipments Rmb 1,372 (US$209) (2009: Rmb 7,785; 2008: Rmb 43,664) | ||
• | Prepaid operating leases Rmb nil (US$nil) (2009: Rmb nil; 2008: Rmb 26,266) |
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3. | Significant accounting judgments, estimates and assumptions (cont’d) | |
3.2 | Estimates and assumptions (cont’d) | |
Withholding tax |
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3. | Significant accounting judgments, estimates and assumptions (cont’d) | |
3.2 | Estimates and assumptions (cont’d) | |
Development costs |
4. | Restatement |
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4. | Restatement (cont’d) |
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4. | Restatement (cont’d) |
1.1.2009 | 31.12.2009 | |||||||||||||||||||||||
As | As | |||||||||||||||||||||||
previously | As | previously | As | |||||||||||||||||||||
reported | Adjustment | restated | reported | Adjustment | restated | |||||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | |||||||||||||||||||
Assets | ||||||||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||
Property, plant and equipment | 2,719,773 | (171,037 | ) | 2,548,736 | 3,146,206 | (171,037 | ) | 2,975,169 | ||||||||||||||||
Investment in joint ventures | 164,979 | 171,037 | 336,016 | 196,988 | 171,037 | 368,025 | ||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||||||
Interest-bearing loans and borrowings | 176,756 | — | 176,756 | 625,256 | (213,381 | ) | 411,875 | |||||||||||||||||
Current liabilities | ||||||||||||||||||||||||
Interest-bearing loans and borrowings | 1,148,732 | — | 1,148,732 | 453,792 | 213,381 | 667,173 | ||||||||||||||||||
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5. | Investments in subsidiaries |
Group’s effective equity | ||||||||||
Place of | interest | |||||||||
Name of significant subsidiary | incorporation/business | 31.12.2009 | 31.12.2010 | |||||||
% | % | |||||||||
Guangxi Yuchai Machinery Company Limited | Republic of China | 76.4 | 76.4 | |||||||
Guangxi Yulin Yuchai Accessories Manufacturing Company Limited | Republic of China | 74.2 | 74.2 | |||||||
Guangxi Yuchai Machinery Monopoly Development Company Limited | Republic of China | 54.9 | 54.9 | |||||||
Xiamen Yuchai Diesel Engines Company Limited | Republic of China | 76.4 | 76.4 | |||||||
Guangxi Yulin Hotel Company Limited | Republic of China | 76.4 | 76.4 | |||||||
Jining Yuchai Engine Company Limited(1) | Republic of China | 39.7 | 39.7 | |||||||
Zhejiang Yuchai Sanli Engine Company Limited(1) | Republic of China | 39.7 | 39.7 | |||||||
HL Global Enterprises Limited(2) | Singapore | 45.4 | 47.4 |
(1) | The Group considers these companies as subsidiaries as it is able to govern the financial and operating policies of these companies through Yuchai’s equity interest and its ability to control the companies’ equity interest. | |
(2) | During the year, the Company converted 33,891,000 of RCPS B shares into HLGE’s ordinary shares. As a result, the Company’s interest in HLGE increased to 47.4%. Having regard to the potential voting rights attributable to the RCPS in HLGE, the Group considers HLGE a subsidiary as it is able to govern the financial and operating policies of HLGE. |
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6. | Investment in associates |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Initial cost | 439,335 | 22,797 | 3,477 | |||||||||
Less: Reclassification to asset classified as held for sale | (410,994 | ) | — | — | ||||||||
28,341 | 22,797 | 3,477 | ||||||||||
Share of post acquisition earnings | ||||||||||||
At 1 January | (40,099 | ) | 18,201 | 2,776 | ||||||||
Less: Reclassification to asset classified as held for sale | 61,274 | — | — | |||||||||
21,175 | 18,201 | 2,776 | ||||||||||
Share of results (net of tax) | 15,976 | (121 | ) | (18 | ) | |||||||
Less: Reclassification to discontinued operations | (13,022 | ) | — | — | ||||||||
Share of results after tax excluding discontinued operations | 2,954 | (121 | ) | (18 | ) | |||||||
Disposal of associate | — | 707 | 108 | |||||||||
Dividend received | (6,038 | ) | — | — | ||||||||
Translation adjustment | 110 | — | — | |||||||||
At 1 January/31 December | 18,201 | 18,787 | 2,866 | |||||||||
Share of reserves | (48,153 | ) | (2,974 | ) | (454 | ) | ||||||
Less: Reclassification to reserves of asset classified as held for sale | 41,255 | — | — | |||||||||
(6,898 | ) | (2,974 | ) | (454 | ) | |||||||
Investment in associate | 39,644 | 38,610 | 5,889 | |||||||||
Reclassification to assets held for sale (Note 11) | (321,487 | ) | — | — | ||||||||
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6. | Investment in associates (cont’d) |
Place of | ||||||||||||
incorporation/ | Group’s effective equity | |||||||||||
Name of company | Principal activities | Business | interest | |||||||||
31.12.2009 | 31.12.2010 | |||||||||||
% | % | |||||||||||
Held by subsidiaries: | ||||||||||||
Scientex Park (M) Sdn Bhd(1) | Property investment and development | Malaysia | 12.7 | 13.3 | ||||||||
Sinjori Sdn Bhd(1) | Property investment and development | Malaysia | 12.7 | 13.3 | ||||||||
Guangxi Yuchai Automobile Spare parts Manufacturing Co., Ltd.(2) | Manufacture spare part and sales of auto spare part, diesel engine & spare part, Metallic materials, generator & spare part, chemical products (exclude dangerous goods), lubricating oil | Republic of China | 14.8 | — | ||||||||
Yuchai Quan Xing Co., Ltd.(3) | Manufacture spare part and sales of auto spare part, diesel engine & spare part, Metallic materials, generator & spare part, chemical products (exclude dangerous goods), lubricating oil | Republic of China | 14.8 | 14.8 | ||||||||
Yuchai Property Management Co., Ltd.(4) | Property management | Republic of China | 22.3 | 22.3 |
(1) | The Company has significant influence in these entities through HLGE who held direct equity interests of 28% interest in these entities. | |
(2) | The Company had significant influence in this entity through YAMC who held direct equity interests of 20% interest in this entity in 2009. The entity was disposed of by YAMC in 2010. | |
(3) | The Company has significant influence in this entity through YAMC who held direct equity interests of 20% interest in this entity. | |
(4) | The Company has significant influence in this entity through YAMC who held direct equity interests of 30% interest in this entity. |
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6. | Investment in associates (cont’d) | |
The summarized financial information on the Group’s associates, which is not adjusted for the percentage of ownership held by the Group, is as follows: |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Assets and liabilities | ||||||||||||
Total assets | 282,365 | 174,982 | 26,688 | |||||||||
Total liabilities | 107,379 | 34,739 | 5,298 | |||||||||
Net assets | 174,986 | 140,243 | 21,390 | |||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Results | ||||||||||||||||
Revenue | 2,274,869 | 163,716 | 105,855 | 16,145 | ||||||||||||
(Loss)/profit after taxation | (91,192 | ) | 2,236 | (719 | ) | (110 | ) | |||||||||
7. | Investment in joint ventures |
1.1.2009 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
(Restated) | (Restated) | |||||||||||||||
Unquoted equity shares, at cost | ||||||||||||||||
As previously reported | 220,398 | 287,510 | 650,454 | 99,208 | ||||||||||||
Reclassify from property, plant and equipment (Note 4) | 171,037 | 171,037 | — | — | ||||||||||||
As restated | 391,435 | 458,547 | 650,454 | 99,208 | ||||||||||||
At 1 January | (54,683 | ) | (46,907 | ) | (83,580 | ) | (12,748 | ) | ||||||||
Share of results after tax | 13,692 | (16,000 | ) | (53,902 | ) | (8,221 | ) | |||||||||
Dividend received | (10,476 | ) | (19,122 | ) | (1,733 | ) | (264 | ) | ||||||||
Write-back of impairment | — | — | 10,936 | 1,668 | ||||||||||||
Translation adjustment | 4,560 | (1,551 | ) | (4,864 | ) | (742 | ) | |||||||||
At 1 January/31 December | (46,907 | ) | (83,580 | ) | (133,143 | ) | (20,307 | ) | ||||||||
Share of post acquisition retained earnings | (8,512 | ) | (6,942 | ) | (2,998 | ) | (457 | ) | ||||||||
Carrying amount of the investment | 336,016 | 368,025 | 514,313 | 78,444 | ||||||||||||
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7. | Investment in joint ventures (cont’d) |
Name of company | Percentage of interest held | Principal activities | ||||||||||||
1.1.2009 | 31.12.2009 | 31.12.2010 | ||||||||||||
% | % | % | ||||||||||||
Held by subsidiaries: | ||||||||||||||
Augustland Hotel Sdn Bhd | 45 | 45 | 45 | Hotel development and operation | ||||||||||
Copthorne Hotel Qingdao Co., Ltd | 60 | 60 | 60 | Owns and operates a hotel in Qingdao, People’s Republic of China | ||||||||||
Shanghai Equatorial Hotel Management Co., Ltd. | 49 | 49 | 49 | Hotel management and hotel consultancy | ||||||||||
Shanghai International Equatorial Hotel Co., Ltd. | 50 | 50 | 50 | Owns and operates a hotel and club in Shanghai, People’s Republic of China | ||||||||||
Y&C Engine Co., Ltd. | — | 45 | 45 | Heavy duty diesel engine | ||||||||||
Yuchai Remanufacturing Services Co., Ltd. | — | — | 51 | Remanufacture and sale of automobile parts, diesel engines and components |
1.1.2009 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Assets and liabilities | ||||||||||||||||
Current assets | 64,270 | 114,502 | 197,526 | 30,127 | ||||||||||||
Non-current assets | 258,496 | 237,352 | 406,166 | 61,950 | ||||||||||||
Current liabilities | 43,428 | 96,003 | 145,808 | 22,239 | ||||||||||||
Non-current liabilities | 89,409 | 27,382 | 78,803 | 12,019 | ||||||||||||
Net assets | 189,929 | 228,469 | 379,081 | 57,819 | ||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Results | RMB’000 | Rmb’000 | Rmb’000 | US$’000 | ||||||||||||
Revenue | 135,488 | 107,229 | 148,349 | 22,627 | ||||||||||||
Profit/(loss) after taxation | 7,509 | (12,795 | ) | (9,162 | ) | (1,397 | ) | |||||||||
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8. | Revenue |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Sale of goods | 10,358,124 | 13,139,578 | 16,138,580 | 2,461,500 | ||||||||||||
Rendering of services | ||||||||||||||||
Consisting of: | ||||||||||||||||
Revenue from hotel and restaurant operations | 37,618 | 26,268 | 41,948 | 6,398 | ||||||||||||
Revenue from sale of development properties | 4,962 | 6,744 | 24,278 | 3,703 | ||||||||||||
Rental income | 4,084 | 3,313 | 3,378 | 515 | ||||||||||||
Total revenue from rendering of services | 46,664 | 36,325 | 69,604 | 10,616 | ||||||||||||
Revenue | 10,404,788 | 13,175,903 | 16,208,184 | 2,472,116 | ||||||||||||
9.1 | Depreciation and amortization, sales commissions and shipping and handling expenses |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Cost of goods sold | 182,473 | 180,043 | 193,504 | 29,514 | ||||||||||||
Research and development expenses | 18,144 | 22,175 | 22,253 | 3,394 | ||||||||||||
Selling, general and administrative expenses | 72,011 | 83,096 | 70,383 | 10,734 | ||||||||||||
272,628 | 285,314 | 286,140 | 43,642 | |||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Selling, general and administrative expenses | 59,129 | 79,129 | 160,283 | 24,447 | ||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Selling, general and administrative expenses | 164,364 | 215,621 | 248,790 | 37,946 | ||||||||||||
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9.2 | (a) Other operating income |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Interest income | 15,228 | 31,576 | 61,719 | 9,414 | ||||||||||||
Foreign exchange gain, net | — | 19,975 | 3,047 | |||||||||||||
Dividend income from associates | — | 11,162 | — | — | ||||||||||||
Gain on disposal of associates | — | 1,906 | 707 | 108 | ||||||||||||
Gain on disposal of subsidiaries | — | 2,833 | 432 | |||||||||||||
Fair value gain on held for trading investment securities | — | — | 17,123 | 2,612 | ||||||||||||
Gain on assignment of debts | — | 5,657 | — | — | ||||||||||||
Negative goodwill | 12,368 | — | — | — | ||||||||||||
Write-back of impairment of receivables | — | 4,895 | — | — | ||||||||||||
Write-back of trade and other payables | 869 | 23,649 | — | — | ||||||||||||
Write-back of impairment of investment in joint ventures | — | — | 10,936 | 1,668 | ||||||||||||
Government grant income | — | 14,823 | 11,129 | 1,697 | ||||||||||||
Others, net | — | — | 4,653 | 709 | ||||||||||||
28,465 | 93,668 | 129,075 | 19,687 | |||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Foreign exchange loss, net | (3,172 | ) | (6,543 | ) | — | — | ||||||||||
Loss on disposal of property, plant and equipment | (3,525 | ) | (8,618 | ) | (33,670 | ) | (5,135 | ) | ||||||||
Write-back of trade and other payables | — | — | (5,249 | ) | (801 | ) | ||||||||||
Others, net | (2,308 | ) | (952 | ) | (2,528 | ) | (386 | ) | ||||||||
(9,005 | ) | (16,113 | ) | (41,447 | ) | (6,322 | ) | |||||||||
9.3 | Research and development costs |
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9.4 | Finance costs |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Interest expense for: | ||||||||||||||||
Bank term loans | 66,765 | 31,382 | 31,302 | 4,774 | ||||||||||||
Finance lease | — | 1,237 | 1,649 | 252 | ||||||||||||
Bills discounting | 90,809 | 60,723 | 109,260 | 16,664 | ||||||||||||
Corporate bonds | 2,991 | (3,332 | ) | — | — | |||||||||||
Bank charges | 1,344 | 2,401 | 2,911 | 444 | ||||||||||||
Less: | ||||||||||||||||
Borrowing costs capitalized | (11,500 | ) | (14,918 | ) | (14,676 | ) | (2,238 | ) | ||||||||
150,409 | 77,493 | 130,446 | 19,896 | |||||||||||||
9.5 | Staff costs |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Wages and salaries | 644,330 | 763,483 | 874,129 | 133,325 | ||||||||||||
Contribution to defined contribution plans(i) | 116,379 | 134,017 | 189,564 | 28,913 | ||||||||||||
Retrenchment costs | 7,097 | 38 | — | — | ||||||||||||
Executive bonuses | 34,818 | 45,182 | 98,239 | 14,984 | ||||||||||||
Staff welfare | 63,243 | 47,439 | 56,780 | 8,660 | ||||||||||||
Others | 5,992 | 5,369 | 1,412 | 215 | ||||||||||||
871,859 | 995,528 | 1,220,124 | 186,097 | |||||||||||||
(i) | As stipulated by the regulations of the PRC, Yuchai and its subsidiaries participate in defined contribution retirement plans organized by the Guangxi Regional Government and Beijing City Government for its staff. All staff are entitled to an annual pension equal to a fixed proportion of their final basic salary amount at their retirement date. For the years ended December 31, 2010 and 2009, Yuchai and its subsidiaries were required to make contributions to the retirement plan at a rate of 20.0% of the basic salary of their staff. Expenses incurred in connection with the plan were Rmb 187,900 (US$28,659) (2009: Rmb 124,257; 2008: Rmb 106,062). | |
Yuchai and its subsidiaries have no obligation for the payment of pension benefits or any other post retirement benefits beyond the annual contributions described above. |
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10. | Income tax |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Current income tax: | ||||||||||||||||
Current income tax charge | 87,676 | 222,047 | 332,524 | 50,717 | ||||||||||||
Adjustments in respect of current income tax of previous year | 4,942 | 5,999 | 3,257 | 497 | ||||||||||||
Deferred tax: | ||||||||||||||||
Relating to origination and reversal of temporary differences | 17,908 | (79,632 | ) | (5,400 | ) | (824 | ) | |||||||||
Adjustments in respect of deferred tax of previous year | — | (1,191 | ) | (2,435 | ) | (371 | ) | |||||||||
Income tax expense reported in the income statement | 110,526 | 147,223 | 327,946 | 50,019 | ||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Computed tax expense | 72,261 | 145,000 | 264,780 | 40,385 | ||||||||||||
Adjustments resulting from: | ||||||||||||||||
Non-deductible expenses | 19,326 | 808 | 10,432 | 1,591 | ||||||||||||
Tax-exempt income | — | (43,143 | ) | (2,994 | ) | (457 | ) | |||||||||
Utilisation of deferred tax benefits previously not recognised | 858 | 165 | (1,792 | ) | (273 | ) | ||||||||||
Deferred tax benefits not recognised | 10,491 | 4,968 | 3,381 | 516 | ||||||||||||
Tax credits for R&D expense | (10,169 | ) | (14,563 | ) | (17,556 | ) | (2,678 | ) | ||||||||
Tax rate differential | (2,017 | ) | 33,516 | 25,027 | 3,816 | |||||||||||
Underprovision in respect of prior years | ||||||||||||||||
- current | 4,942 | 5,999 | 3,257 | 497 | ||||||||||||
- deferred | — | (1,191 | ) | (2,435 | ) | (371 | ) | |||||||||
Withholding tax expense | 15,282 | 15,664 | 45,846 | 6,993 | ||||||||||||
Others | (448 | ) | — | — | — | |||||||||||
Total | 110,526 | 147,223 | 327,946 | 50,019 | ||||||||||||
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10. | Income tax (cont’d) | |
Deferred tax |
Consolidated statement of | ||||||||||||||||||||||||||||
financial position | Consolidated income statement | |||||||||||||||||||||||||||
31.12.2009 | 31.12.2010 | 31.12.2010 | 31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||||||||||||||
Rmb’000 | Rmb’000 | US$’000 | Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | ||||||||||||||||||||||
Deferred income tax liabilities | ||||||||||||||||||||||||||||
Accelerated tax depreciation | (354 | ) | (42 | ) | (6 | ) | — | — | 347 | 53 | ||||||||||||||||||
Unremitted earnings from overseas source income | (440 | ) | (440 | ) | (67 | ) | — | — | — | — | ||||||||||||||||||
Expenditure currently deferred for tax purpose | (100 | ) | — | — | — | — | 100 | 15 | ||||||||||||||||||||
PRC withholding tax on dividend income | (30,946 | ) | (76,792 | ) | (11,713 | ) | (15,282 | ) | (15,664 | ) | (45,846 | ) | (6,993 | ) | ||||||||||||||
(31,840 | ) | (77,274 | ) | (11,786 | ) | (15,282 | ) | (15,664 | ) | (45,399 | ) | (6,925 | ) | |||||||||||||||
Deferred income tax assets | ||||||||||||||||||||||||||||
Accelerated accounting depreciation | 9,508 | 8,418 | 1,284 | (22,781 | ) | 1,025 | (1,090 | ) | (166 | ) | ||||||||||||||||||
Write down of inventory | 45,190 | 36,104 | 5,507 | 11,079 | 14,987 | (9,086 | ) | (1,386 | ) | |||||||||||||||||||
Allowance for doubtful debts | 15,040 | 9,872 | 1,506 | (8,431 | ) | (5,861 | ) | (5,168 | ) | (788 | ) | |||||||||||||||||
Accruals | 120,931 | 192,173 | 29,311 | 7,383 | 45,526 | 71,242 | 10,866 | |||||||||||||||||||||
Tax value of loss carried forward | 1,191 | 2,480 | 378 | 2,323 | (1,132 | ) | 1,307 | 199 | ||||||||||||||||||||
Deferred income | 41,312 | 35,669 | 5,440 | 7,918 | 33,395 | (5,643 | ) | (861 | ) | |||||||||||||||||||
Others | 8,546 | 10,218 | 1,558 | (117 | ) | 8,547 | 1,672 | 256 | ||||||||||||||||||||
241,718 | 294,934 | 44,984 | (2,626 | ) | 96,487 | 53,234 | 8,120 | |||||||||||||||||||||
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10. | Income tax (cont’d) |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Deferred tax assets | 241,718 | 294,934 | 44,984 | |||||||||
Deferred tax liabilities | (31,840 | ) | (77,274 | ) | (11,786 | ) | ||||||
209,878 | 217,660 | 33,198 | ||||||||||
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11. | Discontinued operations |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Profit from discontinued operations: | ||||||||||||||||
- Profit before tax | (33,731 | ) | 14,321 | — | — | |||||||||||
- Gain on disposal | — | — | 12,655 | 1,930 | ||||||||||||
- Taxation | (254 | ) | (1,299 | ) | — | — | ||||||||||
(33,985 | ) | 13,022 | 12,655 | 1,930 | ||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb | Rmb | Rmb | US$ | |||||||||||||
Earnings per share: | ||||||||||||||||
Basic, from discontinued operation | (0.91 | ) | 0.35 | 0.34 | 0.05 | |||||||||||
Diluted, from discontinued operation | (0.91 | ) | 0.35 | 0.34 | 0.05 |
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12. | Earnings per share |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Net profit attributable to ordinary equity holders of the Parent from continuing operations | 274,021 | 615,309 | 1,104,642 | 168,483 | ||||||||||||
Profit attributable to ordinary equity holders of the Parent from a discontinued operation | (33,985 | ) | 13,022 | 12,655 | 1,930 | |||||||||||
Net profit attributable to ordinary equity holders of the Parent for basic earnings | 240,036 | 628,331 | 1,117,297 | 170,413 | ||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Weighted average number of ordinary shares for basic earnings per share | 37,267,673 | 37,267,673 | 37,267,673 | 37,267,673 | ||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Net profit attributable to ordinary equity holders of the Parent from discontinued operation for basic and diluted earnings per share calculations | (33,985 | ) | 13,022 | 12,655 | 1,930 | |||||||||||
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13. | Property, plant and equipment |
Leasehold | Office | Motor | ||||||||||||||||||||||||||
land, | furniture, | and | ||||||||||||||||||||||||||
Freehold | buildings & | Construction- | Plant and | fittings and | transport | |||||||||||||||||||||||
land | improvements | in-progress | machinery | equipment | vehicles | Total | ||||||||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||||||||||||||
(Restated) | (Restated) | |||||||||||||||||||||||||||
Cost: | ||||||||||||||||||||||||||||
At January 1, 2009 | ||||||||||||||||||||||||||||
As previously reported | 591 | 1,496,943 | 275,592 | 2,505,901 | 110,235 | 72,172 | 4,461,434 | |||||||||||||||||||||
Reclassify to investment in joint ventures (Note 7) | — | (196,833 | ) | — | — | — | — | (196,833 | ) | |||||||||||||||||||
At January 1, 2009 (restated) | 591 | 1,300,110 | 275,592 | 2,505,901 | 110,235 | 72,172 | 4,264,601 | |||||||||||||||||||||
Additions | — | 44,847 | 641,010 | 72,098 | 12,185 | 18,796 | 788,936 | |||||||||||||||||||||
Disposals | — | (9,501 | ) | — | (135,295 | ) | (12,057 | ) | (6,676 | ) | (163,529 | ) | ||||||||||||||||
Transfers | — | 24,436 | (307,337 | ) | 282,497 | (108 | ) | 512 | — | |||||||||||||||||||
Write-off | — | (6,283 | ) | — | (2,217 | ) | (1,275 | ) | — | (9,775 | ) | |||||||||||||||||
Translation difference | 3 | (50 | ) | 1,196 | 47 | (20 | ) | (3 | ) | 1,173 | ||||||||||||||||||
At December 31, 2009 and January 1, 2010 | 594 | 1,353,559 | 610,461 | 2,723,031 | 108,960 | 84,801 | 4,881,406 | |||||||||||||||||||||
Additions | — | 75,669 | 517,750 | 24,251 | 9,092 | 17,543 | 644,305 | |||||||||||||||||||||
Disposals | — | (43,969 | ) | — | (48,126 | ) | (10,189 | ) | (8,406 | ) | (110,690 | ) | ||||||||||||||||
Transfers | — | 202,558 | (540,115 | ) | 315,263 | 22,053 | 241 | — | ||||||||||||||||||||
Write-off | — | (456 | ) | (16,183 | ) | (5,792 | ) | — | (17 | ) | (22,448 | ) | ||||||||||||||||
Translation difference | 40 | 242 | (1,437 | ) | 771 | 528 | (35 | ) | 109 | |||||||||||||||||||
At December 31, 2010 | 634 | 1,587,603 | 570,476 | 3,009,398 | 130,444 | 94,127 | 5,392,682 | |||||||||||||||||||||
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13. | Property, plant and equipment (cont’d) |
Leasehold | Office | Motor | ||||||||||||||||||||||||||
land, | furniture, | and | ||||||||||||||||||||||||||
Freehold | buildings & | Construction- | Plant and | fittings and | transport | |||||||||||||||||||||||
land | improvements | in-progress | machinery | equipment | vehicles | Total | ||||||||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||||||||||||||
(Restated) | (Restated) | |||||||||||||||||||||||||||
Depreciation and impairment: | ||||||||||||||||||||||||||||
At January 1, 2009 | ||||||||||||||||||||||||||||
As previously reported | 591 | 296,087 | 20,975 | 1,315,473 | 75,148 | 33,387 | 1,741,661 | |||||||||||||||||||||
Reclassify to investment in joint ventures (Note 7) | — | (25,796 | ) | — | — | — | — | (25,796 | ) | |||||||||||||||||||
At January 1, 2009 (restated) | 591 | 270,291 | 20,975 | 1,315,473 | 75,148 | 33,387 | 1,715,865 | |||||||||||||||||||||
Charge for the year | — | 45,435 | — | 204,360 | 12,018 | 14,867 | 276,680 | |||||||||||||||||||||
Disposals | — | (2,830 | ) | — | (73,445 | ) | (10,112 | ) | (3,779 | ) | (90,166 | ) | ||||||||||||||||
Transfers | — | — | — | 36 | (36 | ) | — | — | ||||||||||||||||||||
Write-off | — | (2,259 | ) | — | (518 | ) | (1,275 | ) | — | (4,052 | ) | |||||||||||||||||
Impairment loss | — | 816 | 6,376 | 5,054 | — | — | 12,246 | |||||||||||||||||||||
Reversal of impairment loss | — | — | — | (4,252 | ) | — | (209 | ) | (4,461 | ) | ||||||||||||||||||
Translation difference | 3 | (1 | ) | — | 75 | 48 | — | 125 | ||||||||||||||||||||
At December 31, 2009 and January 1, 2010 | 594 | 311,452 | 27,351 | 1,446,783 | 75,791 | 44,266 | 1,906,237 | |||||||||||||||||||||
Charge for the year | — | 49,360 | — | 206,236 | 11,420 | 7,428 | 274,444 | |||||||||||||||||||||
Disposals | — | (2,074 | ) | — | (29,496 | ) | (8,410 | ) | (6,301 | ) | (46,281 | ) | ||||||||||||||||
Write-off | — | (129 | ) | (16,183 | ) | (3,672 | ) | — | (17 | ) | (20,001 | ) | ||||||||||||||||
Impairment loss | — | — | — | 1,372 | — | — | 1,372 | |||||||||||||||||||||
Translation difference | 40 | (108 | ) | — | 450 | 240 | (13 | ) | 609 | |||||||||||||||||||
At December 31, 2010 | 634 | 358,501 | 11,168 | 1,621,673 | 79,041 | 45,363 | 2,116,380 | |||||||||||||||||||||
Net book value: | ||||||||||||||||||||||||||||
At January 1, 2009 (restated) | — | 1,029,819 | 254,617 | 1,190,428 | 35,087 | 38,785 | 2,548,736 | |||||||||||||||||||||
At December 31, 2009 (restated) | — | 1,042,107 | 583,110 | 1,276,248 | 33,169 | 40,535 | 2,975,169 | |||||||||||||||||||||
At December 31, 2010 | — | 1,229,102 | 559,308 | 1,387,725 | 51,403 | 48,764 | 3,276,302 | |||||||||||||||||||||
US$ | — | 187,466 | 85,307 | 211,660 | 7,840 | 7,438 | 499,711 | |||||||||||||||||||||
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13. | Property, plant and equipment (cont’d) | |
The impairment loss includes impairment of buildings in Yulin hotel, and Guilin office building. The recoverable amounts of the buildings have been determined based on fair value less cost to sell. Fair values are determined using a market comparison and income approach. | ||
Capitalised borrowing costs | ||
The amount of borrowing costs capitalised during the year ended 31 December 2010 was Rmb 14,676 (US$2,238) (2009: Rmb14,918). The rate used to determine the amount of borrowing costs eligible for capitalisation was 5.00% which is the effective interest rate of the specific and any applicable general borrowings that is used for the purpose of obtaining the qualifying assets. | ||
Finance leases and assets under construction | ||
The carrying value of plant and equipment held under finance leases at December 31, 2009 and 2010 were Rmb 36,818 and Rmb 33,037 (US$5,039) respectively. Leased assets are pledged as security for the related finance lease. |
14. | Investment properties |
Rmb’000 | US$’000 | |||||||
Cost: | ||||||||
As at January 1, 2009 | 35,620 | 5,433 | ||||||
Translation during the year | 358 | 55 | ||||||
As at December 31, 2009 and 1 January 2010 | 35,978 | 5,488 | ||||||
Translation during the year | 2,651 | 404 | ||||||
As at December 31, 2010 | 38,629 | 5,892 | ||||||
Accumulated depreciation: | ||||||||
As at January 1, 2009 | 1,474 | 225 | ||||||
Charge during the year | 652 | 99 | ||||||
As at December 31, 2009 and 1 January 2010 | 2,126 | 324 | ||||||
Charge during the year | 692 | 106 | ||||||
As at December 31, 2010 | 2,818 | 430 | ||||||
Net book value: | ||||||||
As at December 31, 2009 | 33,852 | 5,164 | ||||||
As at December 31, 2010 | 35,811 | 5,462 | ||||||
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14. | Investment properties (cont’d) | |
Details of the investment property (non-current) as at December 31, 2010 are as follows: |
Land | Floor | |||||||||||||||||||
area | area | |||||||||||||||||||
Location | Description | Tenure | (m2) | (m2) | Owned by | |||||||||||||||
49 Jalan Wong Ah Fook, Johor Bahru, Malaysia (Wisma LKN) | 18-storey office block | Freehold | 1,133.1 | 6,948.02 | LKN Development Pte Ltd |
The commercial property is leased to external customers. Each of the lease is for periods of one to three years. Subsequent renewals are negotiated with the lessee. | ||
Investment property is stated at cost. The Company estimated the fair value of the investment property by obtaining an independent valuation from a professional appraiser. The fair values of the property being valued as at December 31, 2009 and 2010 were Rmb 38,623 and Rmb 41,274 (US$6,295) respectively. The fair value is based on market value, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after property marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. | ||
The direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period ended December 31, 2009 and December 31, 2010 are Rmb 2,162 and Rmb 1,995 (US$304). |
15. | Prepaid operating leases |
Yuchai and its subsidiaries are granted the land use rights of 15 to 50 years in respect of such land. Prepaid operating leases represent those amounts paid for land use rights to the PRC government. The prepaid operating leases charged to expense were Rmb 7,982 and Rmb 11,004 (US$1,678) for the year ended December 31, 2009 and 2010, respectively. |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Current | 7,273 | 11,004 | 1,678 | |||||||||
Non-current | 355,931 | 407,468 | 62,148 | |||||||||
Total | 363,204 | 418,472 | 63,826 | |||||||||
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Gross payments for prepaid operating leases | 414,979 | 481,251 | 73,401 | |||||||||
Less: Amounts charged to expense | (51,775 | ) | (62,779 | ) | (9,575 | ) | ||||||
Total | 363,204 | 418,472 | 63,826 | |||||||||
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16. | Goodwill |
Goodwill | Goodwill | |||||||
Rmb’000 | US$’000 | |||||||
Cost: | ||||||||
At January 1, 2009, December 31, 2009 and December 31, 2010 | 218,311 | 33,297 | ||||||
Impairment: | ||||||||
At January 1, 2009, December 31, 2009 and December 31, 2010 | 5,675 | 865 | ||||||
Net book value: | ||||||||
At December 31, 2009 | 212,636 | 32,432 | ||||||
At December 31, 2010 | 212,636 | 32,432 | ||||||
Goodwill represents the excess of costs over fair value of net assets of businesses acquired. | ||
Goodwill acquired through business combinations have been allocated to two cash-generating units for impairment testing as follows: |
• | Yuchai | ||
• | Yulin Hotel. Goodwill allocated to Yulin Hotel has been fully impaired in 2008. |
Carrying amount of goodwill allocated to each of the cash-generating units: |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Yuchai | 212,636 | 212,636 | 32,432 | |||||||||
212,636 | 212,636 | 32,432 | ||||||||||
Yuchai unit | ||
The Group performed its annual impairment test as at December 31, 2010 and 2009. The recoverable amount of the unit is determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a ten year period. The business of Yuchai is stable since the Group had control since 1994 and the business model of Yuchai is unlikely to change in the foreseeable future. The pre-tax discount rate applied to the cash flow projections is 16.98% (2009: 16.98%). No impairment was identified for this unit. |
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16. | Goodwill (cont’d) |
Key assumptions used in value in use calculations | ||
The calculation of value in use for the cash generating units is most sensitive to the following assumptions: |
• | Gross margin | ||
• | Discount rates | ||
• | Growth rate estimates |
Gross margin — Gross margin is based on estimated margins in the budget period. | ||
Discount rates — Discount rates reflect management’s estimate of the risks specific to the cash generating unit and was estimated based on Weighted Average Cost of Capital (“WACC”). This rate was weighted according to the optimal debt/equity structure arrived on the basis of the capitalization structure of the peer group. | ||
Growth rate estimates — Growth rates are based on management’s estimate. The long term rates used to extrapolate the budget for Yuchai are 15.77% and 12.64% for 2010 and 2009 respectively. | ||
Sensitivity to changes in assumptions | ||
With regard to the assessment of value in use of the Yuchai cash generating unit, the Company believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount. |
17. | Intangible assets |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Development costs | — | 13,389 | 2,042 | |||||||||
During the financial year, the Group capitalised Rmb 13,389 (US$2,042) (2009: nil) of development expenditure for intellectual property right, technical skill and knowledge of building a new technology of heavy-duty diesel engine. |
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18. | Other receivables (non-current) |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Amount due from joint ventures(i) | 61,222 | 58,914 | 8,985 | |||||||||
Deposits | 2,000 | 2,000 | 305 | |||||||||
Lease receivable | 8,961 | 4,619 | 705 | |||||||||
72,183 | 65,533 | 9,995 | ||||||||||
(i) | The non-current non-trade amounts due from joint venture partners are unsecured, with interest bearing at 1.681% (2009: 1.719%) per annum and are not expected to repay within 12 months from the financial year end. |
19. | Other financial liabilities |
(a) | Other liabilities (current and non-current) |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Preference shares | 2,119 | 861 | 131 | |||||||||
Finance lease liabilities (Note 33) | 34,991 | 27,751 | 4,233 | |||||||||
37,110 | 28,612 | 4,364 | ||||||||||
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Current | 10,233 | 9,743 | 1,486 | |||||||||
Non-current | 26,877 | 18,869 | 2,878 | |||||||||
Total | 37,110 | 28,612 | 4,364 | |||||||||
Redeemable convertible preference shares (“RCPS”) |
The Series A RCPS issued have the following key terms and conditions: |
(a) | Non-cumulative dividend which shall accrue for each Series A RCPS on a daily basis at 0.1% per annum of the amount equivalent to $0.69 per outstanding Series A RCPS. Series A RCPS rank pari passu with the Series B RCPS and in priority to all other classes of equity securities; |
(b) | HLGE shall redeem all or part of the Series A RCPS upon the occurrence of any of the relevant redemption events as defined in the debt restructuring agreement (“DRA”) entered into by HLGE and certain of its subsidiaries with certain of their bankers and other financial lenders on March 16, 2001; |
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19. | Other financial liabilities (cont’d) |
(a) | Other liabilities (current and non-current) (cont’d) Redeemable convertible preference shares (“RCPS”) (cont’d) |
(c) | Upon the passing of a special resolution at a meeting of the holders of the Series A RCPS convened during the conversion period commencing from the date of issue (March 17, 2005) of such Series A RCPS and expiring 10 years thereafter to approve the conversion of all outstanding Series A RCPS, the Company shall convert all (but not some only) of the outstanding Series A RCPS at the conversion ratio of 1:1 and rounded down to the nearest whole number for fractions upon conversion subject to adjustments pursuant to the DRA; and | ||
(d) | HLGE shall redeem all the outstanding Series A RCPS on the tenth anniversary of the issue date of the Series A RCPS. |
The Series B RCPS issued have the following key terms and conditions: |
(a) | Non-cumulative dividend which shall accrue for each Series B RCPS on a daily basis at 0.1% per annum of the amount equivalent to $0.16 per outstanding Series B RCPS. Series B RCPS rank pari passu with the Series A RCPS and in priority to all other classes of equity securities; |
(b) | HLGE shall redeem all or part of the Series B RCPS upon the occurrence of any of the relevant redemption events as defined in the DRA; |
(c) | Upon the passing of a special resolution at a meeting of the holders of the Series B RCPS convened during the conversion period commencing from the date of issue (March 17, 2005) of such Series B preference shares and expiring 5 years thereafter to approve the conversion of all outstanding Series B RCPS, the Company shall convert all (but not some only) of the outstanding Series B RCPS at the conversion ratio of 1:1 and rounded down to the nearest whole number for fractions upon conversion subject to adjustments pursuant to the DRA; and |
(d) | On the market day immediately following the fifth anniversary of the date of issue of the Series B RCPS, all Series B RCPS which remain unconverted or unredeemed shall be mandatorily converted into ordinary shares of HLGE at conversion ratio of 1:1 and rounded down to the nearest whole number for fractions upon conversion subject to adjustments pursuant to the DRA. |
(e) | If the conversion of all or any part of the Series B Preference Shares held by any holder of Series B Preference Shares (i) is not permitted by law or regulations or (ii) will trigger any obligation to make a general offer by such holder or its concert parties under The Singapore Code on Take-overs and Mergers, such holder will be permitted to convert only such number of Series B Preference Shares held by it as will not (i) result in the breach of such law or regulations or (ii) trigger any take-over obligation on the Mandatory Conversion Date. Such holder will have the option to convert the remaining number of Series B Preference Shares at the Series B Preference Share Conversion Ratio into Ordinary Shares over a period of twenty-two months commencing after the Mandatory Conversion Date, without the requirement of the passing of a Series B Preference Share Special Resolution, by giving a notice in writing to HLGE. |
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19. | Other financial liabilities (cont’d) |
(a) | Other liabilities (current and non-current) (cont’d) |
As announced by the HLGE on 12 February 2010, an aggregate of 18,935,883 Series B RCPS shall be mandatorily converted into an aggregate of 18,935,883 ordinary shares on 18 March 2010, being the market day immediately following the fifth anniversary of the date of issue of the Series B RCPS (the “Mandatory Conversion Date”). | ||
The Articles of Association of HLGE provides that if the conversion of all or any part of the Series B RCPS held by any holder of Series B RCPS (a) is not permitted by law or regulations, or (b) will trigger any obligation to make a general offer by such holder or its concert parties under The Singapore Code on Take-overs and Mergers, such holder will be permitted to convert only such number of Series B RCPS held by it as will not (i) result in the breach of such law or regulations, or (ii) trigger any takeover obligation on the Mandatory Conversion Date. Such holder will have the option to convert the remaining number of Series B RCPS into ordinary shares over a period of twenty-two months commencing after the Mandatory Conversion Date (the “Extension Period”), without the requirement of the passing of a Series B RCPS Special Resolution, by giving a notice in writing to HLGE. | ||
On 11 February 2010, Grace Star, the immediate holding company and a substantial holder of HLGE, had informed HLGE that it would convert only 17,300,000 out of the 93,229,170 of Series B RCPS it held as at that date into ordinary shares of the Company so as not to trigger a take-over obligation on the Mandatory Conversion Date. Following the Mandatory Conversion Date, Grace Star became the sole holder of the remaining 75,929,170 Series B RCPS in issue. | ||
As Grace Star and HLGE are both subsidiaries of the Company, the Series B RCPS is eliminated at consolidation level. |
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19. | Other financial liabilities (cont’d) |
(b) | Interest-bearing loans and borrowings |
31.12.2009 | ||||||||||||||||
Effective | As | 31.12.2009 | ||||||||||||||
interest rate | previously | As | ||||||||||||||
% | Maturity | stated | restated | |||||||||||||
Rmb’000 | Rmb’000 | |||||||||||||||
Current: | ||||||||||||||||
Renminbi denominated loans | 3.81 | 2010 | 434,393 | 434,393 | ||||||||||||
Singapore dollars denominated loans | 2.22 | 2010 | 19,399 | 232,780 | ||||||||||||
453,792 | 667,173 | |||||||||||||||
Non-Current: | ||||||||||||||||
Renminbi denominated loans | 4.86 | 2012 | 150,000 | 150,000 | ||||||||||||
Singapore dollars denominated loans | 1.97 | 2010 | 293,397 | 80,016 | ||||||||||||
US$ denominated loans | 1.35 | 2010 | 181,859 | 181,859 | ||||||||||||
625,256 | 411,875 | |||||||||||||||
Effective | ||||||||||||||||
interest rate | ||||||||||||||||
% | Maturity | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | US$’000 | |||||||||||||||
Current: | ||||||||||||||||
Renminbi denominated loans | 4.73 | 2011 | 372,620 | 56,833 | ||||||||||||
Singapore dollars denominated loans | 1.29 | 2011 | 50,923 | 7,767 | ||||||||||||
423,543 | 64,600 | |||||||||||||||
Non-Current: | ||||||||||||||||
Renminbi denominated loans | 4.86 | 2012 - 2013 | 100,000 | 15,253 | ||||||||||||
Singapore dollars denominated loans | 1.20 | 2011 | 50,925 | 7,767 | ||||||||||||
US$ denominated loans | 1.08 | 2011 | 50,925 | 7,767 | ||||||||||||
201,850 | 30,787 | |||||||||||||||
Note: The Company has the discretion to refinance or rollover the obligations for at least 12 months after the reporting period for the existing loan facilities. |
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19. | Other financial liabilities (cont’d) |
(b) | Interest-bearing loans and borrowings (cont’d) |
S$50.0 million bridging loan with DBS Bank Ltd. (“DBS”): |
On August 28, 2008, the Company entered into a bridging loan agreement of up to S$50 million for 12 months duration, with DBS Bank Ltd., (“DBS”) of Singapore, to partially re-finance the US$50 million revolving credit facility with Sumitomo Mitsui Banking Corporation, Singapore Branch which expired on September 6, 2008. The new facility will also be used to finance the Company’s long-term general working capital requirements. The terms of the facility include certain financial covenants as well as negative pledge and default provisions. The Company has also undertaken to make available to DBS, within 180 days after the end of its financial year, copies of its audited consolidated accounts as at the end of each financial year. |
S$50.0 million credit facility with DBS Bank Ltd. (“DBS”): |
On August 21, 2009, the Company entered into a new short-term loan agreement for up to S$50 million for 12 months duration with DBS Bank Ltd. (“DBS”) of Singapore, to re-finance our existing bridging credit facility with DBS which expired on September 4, 2009. The new facility will be used to finance the Company’s long-term general working capital requirements. The terms of the facility include certain financial covenants as well as negative pledge and default provisions. There is an undertaking by the Company to repay S$2 million every quarter. On September 1, 2010, the credit facility expired and was refinanced for S$10.0 million with the same bank. This loan has a callable clause that resulted in the restatement of the loan from non-current liabilities to current liabilities. Refer to Note 4 for discussion. |
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19. | Other financial liabilities (cont’d) |
(b) | Interest-bearing loans and borrowings(cont’d) |
S$10.0 million credit facility with DBS Bank Ltd. (“DBS”): |
On September 1, 2010, the Company entered into a new short-term loan agreement for up to S$10 million for 12 months duration with DBS Bank Ltd. (“DBS”) of Singapore to refinance the S$50 million facility that was due to mature on September 1, 2010. The facility will be utilised by the Company to finance its long-term working capital requirements. The terms of facility require, among other things, that HLA retains ownership of the special share and that the Company remains a principal subsidiary of HLA, and that HLGE remains listed on the Singapore Exchange Limited. The terms of the facility also include certain financial covenants with respect to the Company’s consolidated tangible net worth (as defined in the agreement) not less than US$350 million at any time, and the ratio of the Company’s consolidated debt to consolidated tangible net worth (as defined in the agreement) not exceeding 1 time. All moneys owing by the Company shall be repaid in full on the date falling 12 months after the drawdown date (“Final Repayment Date”). |
S$21.5 million credit facility with Bank of Tokyo-Mitsubishi, UFJ Ltd, Singapore Branch (“BOTM”): |
On March 20, 2008, the Company entered into a new facility agreement with BOTM to re-finance the existing revolving credit facility. The new unsecured, multi-currency revolving credit facility has a committed aggregated value of S$21.5 million with one-year duration. The new facility will be used to finance the Company’s long-term general working capital requirements. Among other things, the terms of the facility require that Hong Leong Asia Ltd. (“HLA”) retains ownership of the Company’s special share and that the Company remains a consolidated subsidiary of HLA. The terms of the facility also include certain financial covenants with respect to the Company’s tangible net worth (as defined in the agreement) as at 30 June and 31 December of each year not being less than US$120 million and the ratio of the Company’s total net debt (as defined in the agreement) to tangible net worth as at 30 June and 31 December of each year not exceeding 2.0 times, as well as negative pledge provisions and customary drawdown requirements. On March 19, 2009, this credit facility expired and the new facility with same bank was used to refinance this facility which was fully repaid. The Company has also undertaken to make available to the bank, within 180 days after the end of its financial year, copies of its audited consolidated accounts as at the end of and for that financial year. On March 17, 2010, the credit facility expired and was refinanced for S$16.5 million with the same bank. |
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19. | Other financial liabilities (cont’d) |
(b) | Interest-bearing loans and borrowings(cont’d) |
S$16.5 million credit facility with Bank of Tokyo-Mitsubishi, UFJ Ltd, Singapore Branch (“BOTM”): |
On March 17, 2010, the Company entered into a new facility agreement with BOTM to re-finance the existing revolving credit facility. The new unsecured, multi-currency revolving credit facility has a committed aggregated value of S$16.5 million with one year duration. The new facility will be used to finance the Company’s long-term general working capital requirements. Among other things, the terms of the facility require that Hong Leong Asia Ltd. (“HLA”) retains ownership of the Company’s special share and that the Company remains a consolidated subsidiary of HLA. The terms of the facility also include certain financial covenants with respect to the Company’s tangible net worth (as defined in the agreement) as at 30 June and 31 December of each year not being less than US$120 million and the ratio of the Company’s total net debt (as defined in the agreement) to tangible net worth as at 30 June and 31 December of each year not exceeding 2.0 times, as well as negative pledge provisions and customary drawdown requirements. |
US$40.0 million credit facility with Sumitomo: |
On March 30, 2007, the Company entered into an unsecured multi-currency revolving credit facility agreement with Sumitomo for an aggregate of US$40.0 million to refinance the S$60.0 million facility with Oversea — Chinese Banking Corporation Limited (“OCBC”) that was due to mature on July 26, 2007. The facility is available for three years from the date of the facility agreement and will be utilised by the Company to finance its long-term general working capital requirements. The terms of the facility require, among other things, that HLA retains ownership of the special share and that the Company remains a principal subsidiary (as defined in the facility agreement) of HLA. The terms of the facility also include certain financial covenants with respect to the Company’s tangible net worth (as defined in the agreement) as at 30 June and 31 December of each year not being less than US$120 million and the ratio of our total net debt (as defined in the agreement) to tangible net worth as at 30 June and 31 December of each year not exceeding 2.0 times, as well as negative pledge provisions and customary drawdown requirements. The Company has also undertaken to make available to the bank, within 180 days after the end of its financial year (beginning with financial year 2007), copies of its audited consolidated accounts as at the end of and for that financial year. The credit facility expired on March 30, 2010 and was refinanced for US$30.0 million with the same bank. |
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19. | Other financial liabilities (cont’d) |
(b) | Interest-bearing loans and borrowings(cont’d) |
US$30.0 million credit facility with Sumitomo: |
On March 30, 2010, the Company entered into an unsecured multi-currency revolving credit facility agreement with Sumitomo for an aggregate of US$30.0 million to refinance the US$40.0 million facility that was due to mature on March 30, 2010. The facility is available for one year from the date of the facility agreement and will be utilised by the Company to finance its long-term general working capital requirements. The terms of the facility require, among other things, that HLA retains ownership of the special share and that the Company remains a principal subsidiary (as defined in the facility agreement) of HLA. The terms of the facility also include certain financial covenants with respect to the Company’s consolidated tangible net worth (as defined in the agreement) as at 30 June and 31 December of each year not less than US$200 million and the ratio of our total consolidated net debt (as defined in the agreement) to tangible net worth as at 30 June and 31 December of each year not exceeding 2.0 times, as well as negative pledge provisions and customary drawdown requirements. The Company has also undertaken to make available to the bank within 180 days after the end of its financial year (beginning with financial year 2007), copies of its audited consolidated accounts as at the end of and for that financial year. |
20. | Deferred grants |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Balance at beginning of year | 31,514 | 179,233 | 27,337 | |||||||||
Received during the year | 150,917 | 112,592 | 17,173 | |||||||||
Released to the income statement | (3,198 | ) | (11,129 | ) | (1,697 | ) | ||||||
Balance at end of year | 179,233 | 280,696 | 42,813 | |||||||||
Current | 3,198 | 10,960 | 1,672 | |||||||||
Non-current | 176,035 | 269,736 | 41,141 | |||||||||
Total | 179,233 | 280,696 | 42,813 | |||||||||
Government grants have been received for the purchase of certain items of property, plant and equipments. |
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21. | Inventories |
Inventories are comprised of: |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Raw materials | 1,056,581 | 1,333,406 | 203,375 | |||||||||
Work in progress | 21,481 | 38,389 | 5,855 | |||||||||
Finished goods | 1,051,964 | 1,261,065 | 192,341 | |||||||||
Total inventories at the lower of cost and net realisable value | 2,130,026 | 2,632,860 | 401,571 | |||||||||
Inventories recognised as an expense in cost of sales are Rmb 7,490,254, Rmb 9,567,280 and Rmb 11,230,551 (US$1,712,914) in the year ended December 31, 2008, 2009 and 2010 respectively. |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Balance at beginning of year | 136,256 | 286,947 | 43,766 | |||||||||
Charge to consolidated statements of income | 154,700 | (111,763 | ) | (17,046 | ) | |||||||
Written off | (4,009 | ) | (3,752 | ) | (572 | ) | ||||||
Balance at end of year | 286,947 | 171,432 | 26,148 | |||||||||
The amount of write-down/(reversal) of inventories recognised as an expense and included in “cost of sales” amounted to Rmb 52,747, Rmb 154,700 and Rmb (111,763) (US$(17,046)) in year ended December 31, 2008, 2009 and 2010 respectively. |
22. | Other current assets |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Properties held for sale | 91,202 | 62,022 | 9,460 | |||||||||
Held for trading investment | — | 56,628 | 8,637 | |||||||||
91,202 | 118,650 | 18,097 | ||||||||||
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23. | Trade and bills receivables |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Trade receivables (net) | 389,659 | 536,011 | 81,754 | |||||||||
Bills receivables | 2,117,042 | 3,698,464 | 564,100 | |||||||||
2,506,701 | 4,234,475 | 645,854 | ||||||||||
Trade receivables (net) are non-interest bearing and are generally on 60 days’ terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition. | ||
As of December 31, 2009 and 2010, outstanding bills receivable discounted with banks for which the Group retained a recourse obligation totaled Rmb 3,179,737 and Rmb 3,470,662 (US$529,355) respectively. | ||
An analysis of the allowance for doubtful accounts is as follows: |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Balance at beginning of year | 96,147 | 76,646 | 11,690 | |||||||||
Credit to consolidated statements of income | (15,552 | ) | (15,491 | ) | (2,363 | ) | ||||||
Written off | (3,947 | ) | — | — | ||||||||
Translation differences | (2 | ) | 6 | 1 | ||||||||
Balance at end of year | 76,646 | 61,161 | 9,328 | |||||||||
At December 31, 2009 and 2010, gross trade accounts receivable due from a major customer, Dongfeng Automobile Company and its affiliates (“the Dongfeng companies”) were Rmb 271,209 and Rmb 319,400 (US$48,716), respectively. See Note 35 for further discussion of customer concentration risk. |
Neither | ||||||||||||||||||||||||
past due | ||||||||||||||||||||||||
nor | 0-90 | 91-180 | >181-365 | >365 | ||||||||||||||||||||
Total | impaired | days | days | days | days | |||||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | |||||||||||||||||||
As at 31.12.2010 | 4,234,475 | 4,032,899 | 140,811 | 33,502 | 26,948 | 315 | ||||||||||||||||||
As at 31.12.2009 | 2,506,701 | 2,438,348 | 66,888 | 19 | 168 | 1,278 | ||||||||||||||||||
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24. | Other receivables (current) |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
GST/VAT Recoverable | 83,825 | 88,799 | 13,544 | |||||||||
Staff advances | 7,394 | 3,649 | 556 | |||||||||
Amounts due under guarantee contracts, net (see Note 33) | 12,557 | 12,129 | 1,850 | |||||||||
Land deposit | 5,000 | — | — | |||||||||
Associates | 44,662 | 18,604 | 2,838 | |||||||||
Other related parties | 20,310 | 50,726 | 7,737 | |||||||||
Interest receivables | 5,176 | 5,920 | 903 | |||||||||
Custom tax refund | 11,018 | 4,380 | 668 | |||||||||
Others | 23,921 | 53,093 | 8,098 | |||||||||
Impairment losses — other receivables (i) | (32,313 | ) | (26,174 | ) | (3,992 | ) | ||||||
181,550 | 211,126 | 32,202 | ||||||||||
(i) | An analysis of the impairment losses — other receivables is as follows: |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Balance at beginning of year | 79,626 | 32,313 | 4,928 | |||||||||
Credit to consolidated statements of income | (28,506 | ) | (6,234 | ) | (951 | ) | ||||||
Written off | (19,314 | ) | — | — | ||||||||
Translation differences | 507 | 95 | 15 | |||||||||
Balance at end of year | 32,313 | 26,174 | 3,992 | |||||||||
25. | Cash and cash equivalents |
For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the following at 31 December: |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Cash at banks and on hand | 823,695 | 3,657,981 | 4,060,990 | 619,393 | ||||||||||||
Cash at banks earn interest at floating rates based on daily bank deposit rates. The weighted average effective interest rate as at 31 December 2010 for the Group was 2.65% (2009: 1.57%). Cash and cash equivalents denominated in various currencies are held in bank accounts in the Singapore and China. | ||
At December 31, 2009 and 2010, the Group had available Rmb 3,875,020 and Rmb 4,072,593 (US$621,163) respectively of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. The commitment fees incurred for 2009 and 2010 were Rmb 104 and Rmb 102 (US$16) respectively. |
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26. | Issued capital and reserves |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
thousands | thousands | thousands | thousands | |||||||||||||
Authorized shares | ||||||||||||||||
Ordinary share of US$0.10 each | 100,000 | 100,000 | 100,000 | 100,000 | ||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Ordinary shares issued and fully paid | ||||||||||||||||
37,267,673 ordinary shares issued and fully paid at US$0.10 per share | 1,724,196 | 1,724,196 | 1,724,196 | 262,979 | ||||||||||||
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Non-redeemable convertible cumulative preference shares (“NCCPS”) | 36 | 36 | 21 | 3 | ||||||||||||
HLGE issued 197,141,190 NCCPS at an issue price of S$0.02 each on July 4, 2006, expiring on the 10th anniversary of the NCCPs issue date. | ||
The NCCPS shall, subject to the terms and conditions thereof, carry the right to receive, out of the profits of HLGE available for payment of dividends, a fixed cumulative preferential dividend of 10% per annum of the issue price for each NCCPS (the “Preference Dividend”). | ||
Other than the Preference Dividend, the NCCPS holders shall have no further right to participate in the profits or assets of HLGE. | ||
NCCPS holders shall have no voting rights except under certain circumstances referred to in the Companies Act, Chapter 50 of Singapore set out in the terms of the NCCPS. | ||
The NCCPS are not listed and quoted on the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”). However, the holders of the NCCPs are able to exercise their rights to convert the NCCPS into new ordinary shares at a 1 for 1 ratio, subject to the terms and conditions of the NCCPS. Such new ordinary shares will be listed and quoted on the Official List of the SGX-ST when issued. |
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27. | Dividends paid and proposed |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Declared and paid during the year: | ||||||||||||
Dividends on ordinary shares: | ||||||||||||
Interim dividend for 2009US$0.10 per share (2008:US$0.10per share) | 25,457 | — | — | |||||||||
Interim dividend for 2010:US$0.25per share (2009:US$0.10per share) | — | 63,078 | 9,621 | |||||||||
25,457 | 63,078 | 9,621 | ||||||||||
28. | Statutory reserves |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Statutory general reserve (see Note (ii)) | ||||||||||||||||
Balance at January 1 | 174,033 | 176,126 | 180,339 | 27,505 | ||||||||||||
Transfer from retained earnings | 2,093 | 4,213 | 378 | 58 | ||||||||||||
Balance at end of year | 176,126 | 180,339 | 180,717 | 27,563 | ||||||||||||
Statutory public welfare fund(see Note (iii)) | ||||||||||||||||
Balance at January 1 | 70,600 | 85,641 | 85,641 | 13,062 | ||||||||||||
Transfer from retained earnings | 15,041 | — | — | — | ||||||||||||
Balance at end of year | 85,641 | 85,641 | 85,641 | 13,062 | ||||||||||||
General surplus reserve (see Note (iv)) | ||||||||||||||||
Balance at January 1 and December 31 | 25,706 | 25,706 | 25,706 | 3,921 | ||||||||||||
Balance at end of year | 287,473 | 291,686 | 292,064 | 44,546 | ||||||||||||
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28. | Statutory reserves (cont’d) |
(i) | In accordance with the relevant regulations in the PRC, Yuchai and its subsidiaries are required to provide certain statutory reserves which are designated for specific purposes based on the net income reported in the PRC GAAP financial statements. The reserves are not distributable in the form of cash dividends. | |
(ii) | In accordance with the relevant regulations in the PRC, a 10% appropriation to the statutory general reserve based on the net income reported in the PRC financial statements is required until the balance reaches 50% of the authorized share capital of Yuchai and its subsidiaries. Statutory general reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by the issue of new shares to stockholders in proportion to their existing shareholdings, or by increasing the par value of the shares currently held by them, provided that the reserve balance after such issue is not less than 25% of the authorized share capital. | |
(iii) | Yuchai and its subsidiaries shall determine to transfer 5% to 10% of its net income reported in the PRC financial statements to the statutory public welfare fund. There is no limit on the amount that may be allocated to this fund. This fund can only be utilised on capital expenditure for the collective welfare of Yuchai and its subsidiaries’ employees, such as the construction of dormitories, canteen and other welfare facilities, and cannot be utilised to pay staff welfare expenses. The transfer to this fund must be made before the distribution of a dividend of a dividend to stockholders. Since January 1, 2006, in accordance with the amended Company’s policy, the contribution to the fund ceased. | |
(iv) | General surplus reserve is appropriated in accordance with Company’s Articles and resolution of the board of directors. General surplus reserve may be used to offset accumulated losses or increase the registered capital. |
29. | Trade and other payables (current) |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Trade payables | 4,749,651 | 5,699,334 | 869,278 | |||||||||
Other payables | 1,284,645 | 1,949,918 | 297,407 | |||||||||
Deferred grants | 3,198 | 10,960 | 1,672 | |||||||||
Interest payable | 2,498 | 2,336 | 356 | |||||||||
Immediate holding company | 362 | 40 | 6 | |||||||||
Associates | — | 9,458 | 1,443 | |||||||||
Other related parties | 149,892 | 230,271 | 35,121 | |||||||||
Balance at end of year | 6,190,246 | 7,902,317 | 1,205,283 | |||||||||
Terms and conditions of the above financial liabilities: |
• | Trade payables are non-interest bearing and are normally settled on 60-day terms. | ||
• | Other payables are non-interest bearing and have an average term of six months. | ||
• | Interest payable is normally settled throughout the financial year. | ||
• | For terms and conditions relating to related parties, refer to Note 32. |
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30. | Provision for product warranty |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Balance at beginning of year | 188,599 | 259,534 | 39,585 | |||||||||
Provision made | 368,284 | 498,767 | 76,073 | |||||||||
Less: Provision utilised | (297,349 | ) | (406,147 | ) | (61,947 | ) | ||||||
Balance at end of year | 259,534 | 352,154 | 53,711 | |||||||||
31. | Gain on acquisition of Guangxi Yulin Hotel Company Ltd. in settlement of past loan |
The amount represents the recognition of specific impairment provisions totaling Rmb 202,950 on the loans with an aggregate principal amount of Rmb 205 million due from Yuchai Marketing Company Limited (“YMCL”) as of December 31, 2005. YMCL is wholly owned by Coomber Investment Limited (“Coomber”), a shareholder of the Company and State Holding Company (collectively, the “Chinese Shareholders”). | ||
In March and May 2004, Yuchai granted interest-free advances to YMCL at the request of Yuchai’s PRC directors to provide YMCL with initial working capital for its start-up activities. YMCL was set up with the intention of offering a complementary range of services including spare parts distribution, insurance, vehicle financing and warranty servicing. These advances were provided with the approval of the previous Chairman of Yuchai but without prior approval by the majority of the shareholders of Yuchai. | ||
On December 2, 2004, these advances were converted into formal loans and written agreements and were executed between Yuchai and YMCL through an authorized financial institution in the PRC. Under the terms of the loan agreements, the loans were payable in their entirety on December 2, 2005 and interest, at the rate of 5.58% per annum, was payable on a monthly basis. Further, the loans were secured by guarantees given by the Chinese Shareholders. Interest income of Rmb 10,512, Rmb 11,548 and Rmb 4,224 (US$618) was received and recognised in 2006, 2007 and 2008, respectively. | ||
Because the loans had already been disbursed, the Chinese Shareholders had issued guarantees for these loans, and the Company’s relationship with the Chinese Shareholders was improving, the Directors of Yuchai believed that it was in the Company’s and Yuchai’s best interest to ratify the loans. Consequently, the loans were ratified by the Board of Directors of Yuchai in April 2005. | ||
In 2005, the Company discussed with the Chinese Shareholders the possibility of converting the loans into an equity investment in YMCL, subject to the Yuchai board’s approval. This potential alternative was incorporated within the terms of the reorganization agreement entered into by the Company with Yuchai and Coomber on April 7, 2005 (“Reorganization Agreement”). |
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31. | Gain on acquisition of Guangxi Yulin Hotel Company Ltd. in settlement of past loan (cont’d) |
When the loans became due in December 2005, Yuchai was requested to extend the maturity date for the loans. However, the Company and Yuchai had been unable to access the financial statements of YMCL. Consequently, the Directors from the Company’s and Yuchai’s boards had doubts about YMCL’s ability to repay the loans. However, the Company’s and Yuchai’s board of directors considered the request to extend the loans based on representations received from the Chinese Shareholders and management of YMCL concerning their respective abilities and intentions to repay the loans and honor their guarantees, and therefore agreed to extend the repayment date of the loans for an additional year. The extension of the loans was approved by the Board of Directors of Yuchai on December 2, 2005. An agency bank was appointed under PRC requirements to administer the Rmb 205 million loans and the legal method requires such loans to be repaid and the funds re-disbursed. The new loans carry the same terms, including scheduled maturity on December 1, 2006. New guarantees were also granted by the Chinese Shareholders for these loans. The maturity date of the loans was subsequently extended to June 1, 2007 and further extended to May 30, 2008. | ||
The Company discussed this matter with the Chinese Shareholders and management of YMCL and also considered the financial position and financial resources of the State Holding Company and Coomber. CYI management made an assessment of the future cash flows of the State Holding Company and Coomber and concluded that it was likely they will not be able to honor their respective guarantees in the event YMCL is unable to repay the loans when they become due. | ||
Consequently, at that time, CYI management identified a number of possible courses of action in the event YMCL is unable to repay the loans when they become due. These actions included: |
• | Taking actions to force YMCL to liquidate; |
• | Retaining portions of future dividends declared by Yuchai and payable to State Holding Company until the guarantee obligations are fulfilled; and |
• | Commencing legal action against YMCL and possibly the Chinese Shareholders. |
The Company’s management ruled out any form of legal or other enforcement action against the Chinese Shareholders as management believed that Yuchai may not be the first preferred creditor entitled to receive payment of the judgment debt. Moreover, management believed that the process for enforcement of a judgment in China is complex and not as effective when compared with other jurisdictions. In addition, management believed that the commencement of legal or other enforcement actions would likely lead to a deterioration in relations with the Chinese Shareholders which could have a materially adverse impact on the Company’s investment in Yuchai and could lead to the impairment of shareholder value of the Company. Consequently, management believed that it was beneficial to the Company’s shareholders for management to continue their dialogue and seek other possible arrangements with YMCL, Coomber and State Holding Company to resolve the repayment of the Rmb 205 million loans rather than for it to resort to legal and enforcement actions described above. |
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31. | Gain on acquisition of Guangxi Yulin Hotel Company Ltd. in settlement of past loan (cont’d) |
In July 2007, Yuchai’s Board of Directors agreed in principle to a proposal by the State Holding Company to settle the loans due from YMCL, along with various other accounts receivable from YMCL (collectively, the “receivables”), by forgiving the receivables in exchange for the transfer of 100% of the equity ownership in a hotel in Yulin, PRC and YMCL’s central office building in Guilin, PRC. On December 25, 2007, Yuchai, pursuant to the execution of a share transfer contract with YMCL, Coomber and State Holding Company, acquired all the outstanding share capital of Guangxi Yulin Hotel Company Ltd (“Yulin Hotel Company”) for Rmb 245.6 million. As of January 1, 2008, the purchase consideration for this acquisition had not been settled and is included in “Amounts due to related parties” on the consolidated statement of financial position. Agreements were entered into by Yuchai on March 31, 2008 to effect the repayment of the Rmb 205 million loans against the liability of Rmb 245.6 million arising from the purchase of 100% equity interest in Yulin Hotel Company with the balance settled through offset of certain trade receivables due from YMCL, the Guarantors and other related parties. Under the terms of these agreements, Yuchai’s purchase price obligation of Rmb 245.6 million was legally extinguished through the offsetting of this liability. | ||
As of January 1, 2008 and December 31, 2008, the transfer of the 100% equity interest in Yulin Hotel Company was subject to approval from the provincial government regulatory agency in charge of state-owned assets administration in China. Yuchai’s Board of Directors and shareholders had approved an extension of time for obtaining of approval from November 30, 2008 to June 30, 2009 failing which, Yuchai would have had the right to sell to the State Holding Company, who would have been obligated to buy, 100% of the equity in Yulin Hotel Company at the original purchase price of Rmb 245.6 million. This condition is contained in a guarantee letter provided by the original shareholders of Yulin Hotel Company. However, management of the Company was uncertain whether State Holding Company had the financial ability to purchase Yulin Hotel Company for the full contractual amount of Rmb 245.6 million. Consequently, no recovery of the previously recorded impairment loss on the loans due from YMCL was recognised in the Company’s consolidated financial statements as of December 31, 2008 and the provision against the loan was reclassified as a deferred gain in the statement of financial position. Such recovery was recognised in the Company’s consolidated financial statements on January 13, 2009, when Yuchai received approval from the provincial government regulatory agency in charge of state-owned assets administration in China for its acquisition of the 100% equity interest in Yulin Hotel Company. Upon receipt of approval from the provincial government, the gain was recognised in the Statement of Income in 2010. |
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32. | Related party disclosures |
The ultimate parent | ||
Our controlling shareholder, HLA, indirectly owns 10,523,313, or 28.2%, of the outstanding shares of our Common Stock, as well as a special share that entitles it to elect a majority of our directors. HLA controls us through its wholly-owned subsidiary, Hong Leong (China) Limited, or Hong Leong China, and through HL Technology Systems Pte Ltd, or HL Technology, a wholly-owned subsidiary of Hong Leong China. HL Technology owns approximately 21.0% of the outstanding shares of our Common Stock and is, and has since August 2002 been, the registered holder of the special share. HLA also owns, through another wholly-owned subsidiary, Well Summit Investments Limited, approximately 7.2% of the outstanding shares of our Common Stock. HLA is a member of the Hong Leong Investment Holdings Pte Ltd., or Hong Leong Investment, group of companies. Prior to August 2002, we were controlled by Diesel Machinery (BVI) Limited, or Diesel Machinery, which, until its dissolution, was a holding company controlled by Hong Leong China and was the prior owner of the special share. Through HL Technology’s stock ownership and the rights accorded to the Special Share under our bye-laws and various agreements among shareholders, HLA is able to effectively approve and effect most corporate transactions. | ||
There were transactions other than dividends paid, between the Group and HLA of Rmb 299 (US$46), Rmb 470 and Rmb 6,414 during the financial years ended December 31, 2010 and 2009 and 2008 respectively. | ||
Entity with significant influence over the Group | ||
The Yulin City Government through Coomber Investment Ltd owns 18% of the ordinary shares in the Company (2009: 18%). | ||
The following provides the total amount of transactions that have been entered into with related parties for the relevant financial year (for information regarding outstanding balances at December 31, 2010 and 2009, refer to Notes 24 and 29): |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Sales of diesel engines to State Holding Company, its subsidiaries and affiliates (See Note (i)) | 196,997 | 338,094 | 497,637 | 75,901 | ||||||||||||
Sales of raw materials to YMCL (See Note (i)) | — | 232,560 | 350,346 | 53,436 | ||||||||||||
Sales to affiliates (See Note (i)) | 18,067 | 61,521 | 4,442 | 678 | ||||||||||||
Purchase of raw materials and supplies from subsidiaries and affiliates of State Holding Company (See Note (i)) | (1,013,106 | ) | (1,509,950 | ) | (1,707,123 | ) | (260,375 | ) | ||||||||
Purchases of raw materials and supplies from affiliates (See Note (i)) | (17,781 | ) | (94,236 | ) | (38,163 | ) | (5,821 | ) | ||||||||
Delivery expense charged by a subsidiary of YMCL (See Note (ii)) | (161,036 | ) | (210,129 | ) | (244,360 | ) | (37,270 | ) | ||||||||
Storage expense charged by a subsidiary of SHC (See Note (iii)) | — | (58,667 | ) | (41,507 | ) | (6,331 | ) |
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32. | Related party disclosures (cont’d) |
Entity with significant influence over the Group (cont’d) |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
General and administrative expenses | ||||||||||||||||
- charged by State Holding Company (See Note (iv)) | (34,934 | ) | (35,857 | ) | (21,906 | ) | (3,341 | ) | ||||||||
- charged by HLA (see Note (v)) | (6,758 | ) | (470 | ) | (299 | ) | (46 | ) | ||||||||
- charged by an affiliate of HLA (See Note (vi)) | (6,760 | ) | (8,124 | ) | (6,260 | ) | (955 | ) |
(i) | Sale and purchase of raw materials, supplies, scraps and diesel engines to/from State Holding Company, its subsidiaries and affiliates. Certain subsidiaries and affiliates of State Holding Company have acted as suppliers of raw materials and supplies to the Company and certain subsidiaries of State Holding Company have acted as sales agents of the Group. The State Holding Company also purchased scraps from the Group. State Holding Company’s subsidiaries and affiliates include YMCL. Management considers that these transactions were entered into in the normal course of business and expects that these transactions will continue on normal commercial terms. | |
(ii) | Delivery expense charged by YMCL and its subsidiaries. The fee is for the delivery of spare parts charged by YMCL, which were recorded in “Cost of goods sold” and “Selling, general and administrative expenses” respectively. Management considers that these transactions were entered into in the normal course of business and these transactions continued on normal commercial terms. | |
(iii) | Storage expenses charged by subsidiary of SHC for the storage of engines components and parts for Yuchai and delivery to the production facilities are required. | |
(iv) | General and administrative expenses charged by State Holding Company State Holding Company charges Yuchai for certain general and administrative expenses in respect of rental of certain office premises, property management services rendered by State Holding Company. The expenses are charged to Yuchai and its subsidiaries by State Holding Company on an actual incurred basis. Management believes that the expenses charged to Yuchai by State Holding Company would not have been materially different on a stand-alone basis because Yuchai could provide these services for itself at approximately the same amount. | |
(v) | Management fees, general and administrative expenses charged by HLA. | |
(vi) | General and administrative expenses charged by affiliates of HLA. The fees mainly relate to office rental, secretarial fees, insurance fees, professional and consultancy fees, and miscellaneous office expenses. |
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32. | Related party disclosures (cont’d) | |
Entity with significant influence over the Group (cont’d) | ||
In addition to the above, Yuchai also entered into transactions with other PRC Government owned enterprises. Management considers that these transactions were entered into in the normal course of business and expects that these transactions will continue on normal commercial terms. Balances with other PRC entities are excluded from this caption. | ||
Amounts due to the holding company comprise mainly general and administrative expenses charged by the holding company in relation to the management, financial planning and control and other services provided to Yuchai. The balance is unsecured, interest free and repayable on demand. | ||
Compensation of key management personnel of the Group |
31.12.2008 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
Short term employee benefits | 24,773 | 25,992 | 53,883 | 8,218 | ||||||||||||
The non-executive directors do not receive pension entitlements from the Group. |
33. | Commitments and contingencies |
Operating lease commitments — Group as lessee | ||
The Group has entered into commercial leases on certain motor vehicles and items of machinery. These leases have an average life of between three and five years with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases. | ||
Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows: |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Within one year | 9,007 | 16,281 | 2,483 | |||||||||
After one year but not more than five years | 7,968 | 20,469 | 3,122 | |||||||||
16,975 | 36,750 | 5,605 | ||||||||||
The minimum lease payments recognised as an expense in the period ended December 31, 2008, 2009 and 2010 amounted to Rmb 24,306, Rmb 46,092 and Rmb 49,780 (US$7,593). |
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33. | Commitments and contingencies (cont’d) | |
Operating lease commitments — Group as lessor | ||
The Group has entered into commercial property leases on its investment property portfolio, consisting of the Group’s surplus office and manufacturing buildings. These non-cancellable leases have remaining terms of between 6 and 50 years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. | ||
Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows: |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Within one year | 5,998 | 7,326 | 1,117 | |||||||||
After one year but not more than five years | 16,522 | 11,091 | 1,692 | |||||||||
More than five years | 515 | 17 | 3 | |||||||||
23,035 | 18,434 | 2,812 | ||||||||||
Finance lease commitments | ||
The Group has finance leases for various items of plant and machinery. Except for leases under sale and leaseback arrangement described below, these leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease. Future minimum lease payments under finance leases with the present value of the net minimum lease payments are as follows: |
31.12.2009 | 31.12.2010 | |||||||||||||||
Present | Present | |||||||||||||||
Minimum | value of | Minimum | value of | |||||||||||||
payments | payments | payments | payments | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | |||||||||||||
Within one year | 11,397 | 9,748 | 11,392 | 9,743 | ||||||||||||
After one year but not more than five years | 30,604 | 25,243 | 21,720 | 18,008 | ||||||||||||
Total minimum lease payments | 42,001 | 34,991 | 33,112 | 27,751 | ||||||||||||
Less amounts representing finance charges | (7,010 | ) | — | (5,361 | ) | — | ||||||||||
Present value of minimum lease payments | 34,991 | 34,991 | 27,751 | 27,751 | ||||||||||||
The finance lease was entered into by YAMC, a subsidiary of Yuchai. |
Letter of credits | ||
As of December 31, 2009 and 2010, Yuchai had issued irrevocable letter of credits of Rmb 60.9 million and Rmb 145.6 million (US$22.2 million), respectively. |
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33. | Commitments and contingencies (cont’d) | |
Sale and leaseback | ||
During the year ended December 31, 2009, in order to fund its business expansion plan in the current year, YAMC sold 912 equipments to CBD Leasing Company Limited for Rmb 40 million. These equipments were the major production machinery of YAMC. The lease agreements include a buy back provision which allows YAMC to purchase the assets at the end of the lease term. The equipments were leased back for approximately Rmb 48,672 and accounted for as the assets owned by YAMC at the present value of the minimum lease payment of Rmb 40,058. Depreciation was provided by the management on a straight-line basis over the useful life of the assets. | ||
Product liability | ||
The General Principles of the Civil Law of China and the Industrial Product Quality Liability Regulations imposes that manufacturers and sellers are liable for loss and injury caused by defective products. Yuchai and its subsidiaries do not carry product liability insurance. Yuchai and its subsidiaries have not had any significant product liability claims brought against them. | ||
Environmental liability | ||
China adopted its Environmental Protection Law in 1989, and the State Council and the State Environmental Protection Agency promulgate regulations as required from time to time. The Environmental Protection Law addresses issues relating to environmental quality, waste disposal and emissions, including air, water and noise emissions. Environmental regulations have not had a material impact on Yuchai’s results of operations. Yuchai delivers, on a regular basis, burned sand and certain other waste products to a waste disposal site approved by the local government and makes payments in respect thereof. Yuchai expects that environmental standards and their enforcement in China will, as in many other countries, become more stringent over time, especially as technical advances make achievement of higher standards more feasible. Yuchai has built an air filter system to reduce the level of dust and fumes resulting from its production of diesel engines. The PRC emission standard equivalent to Euro III is implemented throughout China from 2008. | ||
In addition, emission standard equivalent to Euro I was implemented on August 31, 2004. After that date, the engines equipped with Euro I engines cannot be sold and used in major urban area. The manufacture and sale of Euro II engines is expected to be progressively phased out starting June 30, 2008 and the PRC emission standard equivalent to Euro III has been implemented progressively throughout China from July 1, 2008. There can be no assurance that Yuchai will be able to comply with these emission standards or that the introduction of these and other environmental regulations will not result in a material adverse effect on our business, financial condition and results of operations. | ||
Yuchai is subject to Chinese national and local environmental protection regulations which currently impose fees for the discharge of waste substances, require the payment of fines for pollution, and provide for the closure by the Chinese government of any facility that fails to comply with orders requiring Yuchai to cease or improve upon certain activities causing environmental damage. Due to the nature of its business, Yuchai produces certain amounts of waste water, gas, and solid waste materials during the course of its production. Yuchai believes its environmental protection facilities and systems are adequate for it to comply with the existing national, provincial and local environmental protection regulations. However, Chinese national, provincial or local authorities may impose additional or more stringent regulations which would require additional expenditure on environmental matters or changes in our processes or systems. |
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33. | Commitments and contingencies (cont’d) | |
Dispute with Bank of China | ||
In 2003, the Yulin Branch of Bank of China (“BOC”) initiated legal proceedings to recover Rmb 6,603 from Yuchai based on an irrevocable letter of guarantee issued by Yuchai to the BOC in 1993 to secure a loan of US$550 to Great Wall Machinery Plant (“Great Wall”). At trial, a Yulin court ruled that if Great Wall could not pay the loan, Yuchai would be liable to pay the guaranteed sum to the BOC. Yuchai appealed unsuccessfully. | ||
In January 2004, the State Holding Company issued a letter of commitment confirming that it would reimburse Yuchai in the event that Yuchai was required to pay on this guarantee. | ||
Based on the advice from the Company’s Legal Counsel, the Company has recorded a loss contingency equal to the amount of the claim. The amounts due to the BOC and from the State Holding Company have been recorded in “Accrued expenses and other liabilities” and “Amounts due from related parties”, respectively. | ||
In 2009 and 2010, there was no new development in this case. | ||
Guarantees | ||
YEGCL provides guarantees of loans granted by commercial banks in the PRC to unrelated third-party individuals who have obtained the loans to purchase automobiles equipped with diesel engines produced by Yuchai. The guarantees cover the entire principal amount of the loan, which generally has a term of one to two years with equal monthly or quarterly installment payments by the borrower. The guarantees are secured by cash deposits from the individual to YEGCL and by the automobile. In the event of defaults on payment, YEGCL would be required under its guarantee to make payments to the banks on behalf of the borrowers. | ||
In return for issuing the guarantee, YEGCL receives a premium fee ranging from 1% to 3% of the loan amount for the years ending December 31, 2009 and 2010, respectively, which is considered to be the fair value of YEGCL’s guarantee at its inception and is recorded as a liability in accordance with the provisions of IAS 39. The Group received Rmb nil of premium fees in 2009 and 2010 respectively, which are included in “Accrued expenses and other liabilities” and recognised as revenue on a straight line basis over the terms of the respective guarantee. Guarantee fees recognised as revenue in 2009 and 2010 amounted to Rmb 54 and Rmb nil (US$ nil), respectively. As of December 31, 2009 and 2010, deferred guarantee fee revenue amounted to Rmb nil and Rmb nil (US$ nil), respectively. | ||
Subsequent to initial measurement and recognition of the liability for YEGCL’s obligations under these loan guarantees, management evaluates YEGCL’s guarantee portfolio and accounts for potential loss contingencies associated with the guarantees based on the estimated losses resulting from known and expected defaults. Each guarantee is secured by a cash deposit from the borrower and a security interest in the automobile purchased by the borrower. As of December 31, 2009 and 2010, YEGCL had gross receivables of Rmb 12,557 and Rmb 12,129 (US$1,850), respectively, relating to payments made by YEGCL to the banks in conjunction with loans that had been defaulted and to be recovered from the individual borrowers. YEGCL recorded a bad debt allowance in the amount of Rmb 12,273 and Rmb 12,061 (US$1,840) for other receivables, and Rmb 236 and Rmb 235 (US$36) for potential losses associated with the guarantee at December 31, 2009 and 2010 respectively. The net receivables amount of Rmb 284 and Rmb 68 (US$10) is included in “Other receivables, net” in the accompanying consolidated statement of financial positions (See Note 24). |
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33. | Commitments and contingencies (cont’d) | |
Guarantees (cont’d) | ||
As of December 31, 2009 and 2010, the maximum potential amount of future undiscounted payments YEGCL could be required to make under the guarantees was Rmb 12,050 and Rmb 11,712 (US$1,786), respectively. YEGCL held cash deposits of Rmb 1,237 and Rmb 937 (US$143) as of December 31, 2009 and 2010 and security interests in automobiles with an aggregate initial purchase value of Rmb 181,164 and Rmb 85,275 (US$13,006) as of December 31, 2009 and 2010, respectively. If, in the event of default the cash deposits and the amount of recoveries, if any, from repossession of the automobiles may not entirely mitigate YEGCL’s losses then, YEGCL accumulates the total expected risk against the total expected recoverable amount and provides for any expected shortfall. Accordingly, management recorded an accrual for potential losses associated with the guarantees in the amount of Rmb 236 and Rmb 235 (US$36) as of December 31, 2009 and 2010, respectively, included in “Accrued expenses and other liabilities”. |
34. | Segment information |
• | Yuchai primarily conducts manufacturing and sale of diesel engines which are mainly distributed in the PRC market. | ||
• | The HLGE group is engaged in hospitality and property development activities conducted mainly in the PRC and Malaysia. |
The TCL group primarily conducts distribution of consumer electronic products with operations mainly in the PRC (including Hong Kong). TCL also has other business activities relating to contract manufacturing, property development and investment in the PRC. This segment was classified as a discontinued operation during the financial year of 2009. In 2010, with the disposal of 580,253,000 shares in TCL by the Company, the Company no longer has significant influence over the operating and financial policies of TCL, and TCL is no longer regarded as a reporting segment of the Group. | ||
HLGE and TCL are each listed on the Main Board of the Singapore Exchange Securities Trading Limited. | ||
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to operating segments. |
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34. | Segment information (cont’d) |
Adjustments | Consolidated | |||||||||||||||
Year ended | and | financial | ||||||||||||||
December 31, 2010 | Yuchai | HLGE | eliminations | statements | ||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | |||||||||||||
Revenue | ||||||||||||||||
External customers | 16,158,415 | 49,769 | — | 16,208,184 | ||||||||||||
Inter-segment | — | — | — | — | ||||||||||||
Total revenue | 16,158,415 | 49,769 | — | 16,208,184 | ||||||||||||
Results | ||||||||||||||||
Interest income | 60,285 | 1,169 | 265 | (1) | 61,719 | |||||||||||
Interest expense | (122,178 | ) | (15,791 | ) | 10,434 | (1) | (127,535 | ) | ||||||||
Impairment of property, plant and equipment | (1,372 | ) | — | — | (1,372 | ) | ||||||||||
Depreciation and amortisation | (279,295 | ) | (4,749 | ) | (2,096 | )(2) | (286,140 | ) | ||||||||
Share of profits of associates | (661 | ) | 540 | — | (121 | ) | ||||||||||
Share of losses of joint ventures | (13,498 | ) | 6 | (40,410 | )(9) | (53,902 | ) | |||||||||
Income tax (expense)/ credit | (286,554 | ) | 9,180 | (50,572 | )(3) | (327,946 | ) | |||||||||
Segment profit | 1,851,597 | (23,787 | ) | (62,607 | )(4) | 1,765,203 | ||||||||||
Total assets | 15,194,764 | 518,462 | 533,037 | (5) | 16,246,263 | |||||||||||
Total liabilities | 9,201,795 | 595,542 | (337,001 | )(6) | 9,460,336 | |||||||||||
Other disclosures | ||||||||||||||||
Investment in associates | 1,661 | 36,949 | — | 38,610 | ||||||||||||
Investment in joint ventures | 245,827 | 126,924 | 141,562 | (8) | 514,313 | |||||||||||
Capital expenditure | 625,773 | 3,833 | 20 | (7) | 629,626 | |||||||||||
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34. | Segment information (cont’d) |
Adjustments | Consolidated | |||||||||||||||||||
Year ended | TCL | and | financial | |||||||||||||||||
December 31, 2009 | Yuchai | HLGE | (Discontinued) | eliminations | statements | |||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||||||||
Revenue | ||||||||||||||||||||
External customers | 13,161,087 | 14,816 | — | — | 13,175,903 | |||||||||||||||
Inter-segment | — | — | — | — | — | |||||||||||||||
Total revenue | 13,161,087 | 14,816 | — | — | 13,175,903 | |||||||||||||||
Results | ||||||||||||||||||||
Interest income | 29,674 | 1,788 | 114 | (1) | 31,576 | |||||||||||||||
Interest expense | (72,069 | ) | (21,160 | ) | 15,736 | (1) | (77,493 | ) | ||||||||||||
Impairment of property, plant and equipment | (7,785 | ) | — | — | — | (7,785 | ) | |||||||||||||
Depreciation and amortisation | (275,240 | ) | (2,659 | ) | — | (7,415 | )(2) | (285,314 | ) | |||||||||||
Share of profits of associates | 2,714 | 240 | — | — | 2,954 | |||||||||||||||
Share of losses of joint ventures | (83 | ) | (15,917 | ) | — | ��� | (16,000 | ) | ||||||||||||
Income tax (expense)/ credit | (130,430 | ) | 702 | (17,495 | )(3) | (147,223 | ) | |||||||||||||
Segment profit | 1,027,837 | (24,323 | ) | — | (36,846 | )(4) | 966,668 | |||||||||||||
Total assets | 11,905,224 | 521,469 | 321,487 | 557,531 | (5) | 13,305,911 | ||||||||||||||
Total liabilities | 7,333,157 | 596,377 | — | (33,413 | )(6) | 7,896,121 | ||||||||||||||
Other disclosures | ||||||||||||||||||||
Investment in associates | 5,615 | 34,029 | — | — | 39,644 | |||||||||||||||
Investment in joint ventures | 67,418 | 129,570 | — | 171,037 | (8) | 368,025 | ||||||||||||||
Capital expenditure | 734,555 | 46,778 | — | — | 781,333 | |||||||||||||||
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34. | Segment information (cont’d) |
Adjustments | Consolidated | |||||||||||||||||||
Year ended | TCL | and | financial | |||||||||||||||||
December 31, 2008 | Yuchai | HLGE | (Discontinued) | eliminations | statements | |||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||||||||
Revenue | ||||||||||||||||||||
External customers | 10,384,022 | 20,766 | — | — | 10,404,788 | |||||||||||||||
Inter-segment | — | — | — | — | — | |||||||||||||||
Total revenue | 10,384,022 | 20,766 | — | — | 10,404,788 | |||||||||||||||
Results | ||||||||||||||||||||
Interest income | 8,623 | 5,153 | — | 1,452 | (1) | 15,228 | ||||||||||||||
Interest expense | (134,245 | ) | (36,497 | ) | — | 20,333 | (1) | (150,409 | ) | |||||||||||
Goodwill impairment | (5,675 | ) | — | — | — | (5,675 | ) | |||||||||||||
Impairment of property, plant and equipment and prepaid operating assets | (69,930 | ) | — | — | — | (69,930 | ) | |||||||||||||
Depreciation and amortisation | (262,633 | ) | (2,381 | ) | — | (7,614 | )(2) | (272,628 | ) | |||||||||||
Share of profits of associates | 1,761 | 956 | — | — | 2,717 | |||||||||||||||
Share of profits of joint ventures | — | 13,692 | — | — | 13,692 | |||||||||||||||
Income tax (expense)/credit | (95,249 | ) | 5 | — | (15,282 | )(3) | (110,526 | ) | ||||||||||||
Segment profit | 507,777 | (4,388 | ) | — | (21,647 | )(4) | 481,742 | |||||||||||||
Total assets | 8,539,153 | 595,329 | 833,162 | (5) | 9,967,644 | |||||||||||||||
Total liabilities | 4,770,199 | 639,874 | — | (57,388 | )(6) | 5,352,685 | ||||||||||||||
Other disclosures | ||||||||||||||||||||
Investments in associates | 7,261 | 33,896 | 287,443 | — | 328,600 | |||||||||||||||
Investments in joint ventures | — | 164,979 | — | 171,037 | (8) | 336,106 | ||||||||||||||
Capital expenditure | 728,572 | 2,099 | — | — | 730,671 | |||||||||||||||
(1) | Included here are interest income and expense of the holding entity’s interest income and expense and inter-segment interest income and expense that are eliminated on consolidation. | |
(2) | Included here are the depreciation of the holding entity’s fixed assets and additional depreciation on HLGE’s investment property and property, plant and equipments valued at fair value in excess of costs. | |
(3) | This relates mainly to the withholding tax provisions for dividends that are expected to be paid from income earned after December 31, 2007 by Yuchai that has not been remitted. | |
(4) | Profit for each operating segment does not include income tax expense and (loss)/profit after tax for the year from discontinued operations. | |
(5) | Segment assets included goodwill and other assets of holding entity and increase in value of HLGE’s property, plant and equipment based on fair value in excess of costs. | |
(6) | Segment liabilities consist of the liabilities of the holding entity. | |
(7) | Included here are capital expenditures incurred by the holding entity. | |
(8) | Included here are HLGE’s share of its joint ventures’ property, plant and equipments valued at fair value in excess of costs. | |
(9) | Included here are HLGE’s share of additional depreciation on its joint ventures’ property, plant and equipments valued at fair value in excess of costs. |
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34. | Segment information (cont’d) |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
China | 13,162,087 | 16,176,305 | 2,467,254 | |||||||||
Other countries | 13,816 | 31,879 | 4,862 | |||||||||
Total | 13,175,903 | 16,208,184 | 2,472,116 | |||||||||
1.1.2009 | 31.12.2009 | 31.12.2010 | 31.12.2010 | |||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | US$’000 | |||||||||||||
(Restated) | (Restated) | |||||||||||||||
China | 3,237,063 | 3,891,833 | 4,419,873 | 674,131 | ||||||||||||
Other countries | 53,627 | 53,780 | 40,046 | 6,108 | ||||||||||||
Total | 3,290,690 | 3,945,613 | 4,459,919 | 680,239 | ||||||||||||
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35. | Financial risk management objectives and policies |
The Group’s principal financial liabilities comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has loan, trade and other receivables, and cash and short-term deposits that derive directly from its operations. The Group also holds available-for-sale investments. | ||
The Group is exposed to market risk, credit risk and liquidity risk. | ||
Market risk | ||
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of the market risk management is to manage and control market risk exposures within acceptable parameters while optimizing the return on risk. | ||
Interest rate risk | ||
The primary source of the Group’s interest rate risk relates to interest bearing bank deposits and its borrowings from banks and financial institutions. The interest bearing borrowings of the Group are disclosed in Note 19 to the financial statements. As certain rates are based on interbank offer rates, the Group is exposed to cash flow interest rate risk. This risk is not hedged. Interest bearing bank deposits are short to medium-term in nature but given the significant cash and bank balances held by the Group, any variation in the interest rates may have a material impact on the results of the Group. | ||
The Group manages its interest rate risk by having a mixture of fixed and variable rates for its deposits and borrowings. | ||
Interest rate sensitivity | ||
The sensitivity analyses below have been determined based on the exposure to interest rates for bank deposits and interest bearing financial liabilities at the end of the reporting period and the stipulated change taking place at the beginning of the year and held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis point increase or decrease is used and represents management’s assessment of the possible change in interest rates. | ||
If interest rate had been 50 basis points higher or lower and all other variables were held constant, the profit for the year ended December 31, 2010 of the Group would increase/decrease by Rmb 17.2 million (US$2.6 million) (2009: profit increase/decrease by Rmb 12.9 million). | ||
Foreign currency risk | ||
The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in currencies other than the respective functional currencies of entities within the Group. The currencies giving rise to this risk are primarily the Singapore dollar, Ringgit Malaysia, Chinese Renminbi and United States dollar. | ||
Foreign currency translation exposure is managed by incurring debt in the operating currency so that where possible operating cash flows can be primarily used to repay obligations in the local currency. This also has the effect of minimising the exchange differences recorded against income, as the exchange differences on the net investment are recorded directly against equity. |
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35. | Financial risk management objectives and policies (cont’d) | |
Foreign currency risk (cont’d) |
The Group’s exposures to foreign currency are as follows: |
December 31, 2009 | ||||||||||||||||||||
United | ||||||||||||||||||||
Singapore | Euro | States | Chinese | |||||||||||||||||
Group | Dollar | Dollars | Dollar | Renminbi | Others | |||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||||||||
Other investments | 326,058 | — | — | — | — | |||||||||||||||
Trade and other receivables | 374 | 9,171 | 135,981 | 32,464 | — | |||||||||||||||
Cash and cash equivalents | 78,372 | 253 | 2,636 | — | 22 | |||||||||||||||
Financial liabilities | (492,752 | ) | — | — | — | — | ||||||||||||||
Trade and other payables | (66,889 | ) | — | (55,095 | ) | (1,446 | ) | (19 | ) | |||||||||||
In Rmb’000 | (154,837 | ) | 9,424 | 83,522 | 31,018 | 3 | ||||||||||||||
In US$’000 | (23,616 | ) | 1,437 | 12,739 | 4,731 | — | ||||||||||||||
December 31, 2010 | ||||||||||||||||||||
United | ||||||||||||||||||||
Singapore | Euro | States | Chinese | |||||||||||||||||
Group | Dollar | Dollars | Dollar | Renminbi | Others | |||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||||||||
Other investments | 59,615 | — | — | — | — | |||||||||||||||
Trade and other receivables | 424 | 20,072 | 122,757 | 35,290 | 18 | |||||||||||||||
Cash and cash equivalents | 90,804 | — | 3,117 | — | — | |||||||||||||||
Financial liabilities | (152,772 | ) | — | — | — | — | ||||||||||||||
Trade and other payables | (44,901 | ) | (674 | ) | (48,281 | ) | (4,453 | ) | (20 | ) | ||||||||||
In Rmb’000 | (46,830 | ) | 19,398 | 77,593 | 30,837 | (2 | ) | |||||||||||||
In US$’000 | (7,143 | ) | 2,959 | 11,835 | 4,703 | — | ||||||||||||||
Foreign currency risk sensitivity |
A 10% strengthening of the following major currencies against the functional currency of each of the Group’s entities at the reporting date would increase/(decrease) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Profit | Profit | Profit | ||||||||||
before tax | before tax | before tax | ||||||||||
Singapore dollar | (15,484 | ) | (4,683 | ) | (714 | ) | ||||||
Euro dollar | 942 | 1,940 | 296 | |||||||||
United States dollar | 8,352 | 7,759 | 1,184 | |||||||||
Chinese Renminbi | 3,102 | 3,084 | 470 |
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35. | Financial risk management objectives and policies (cont’d) |
Equity price risk | ||
The Group has investment in TCL which is quoted. | ||
Equity price risk sensitivity | ||
A 10% increase/(decrease) in the underlying prices at the reporting date would increase/(decrease) equity by the following amount: |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Equity | 4,606 | 5,663 | 864 |
Credit risk | ||
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables and loan notes) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. | ||
Credit risks related to receivables: Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit limits are established for all customers based on internal rating criteria. | ||
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed for all customers requiring credit over a certain amount. | ||
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistic for similar financial assets. | ||
The allowance account in respect of trade and other receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired financial asset. |
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35. | Financial risk management objectives and policies (cont’d) |
Credit risk (cont’d) | ||
At December 31, 2010, the Group had approximately top 20 customers (2009: top 20 customers) that owed the Group more than Rmb 346.9 million (US$52.9 million) and accounted for approximately 58% (2009: 70%) of accounts receivables (excluding bills receivables) owing respectively. These customers are located in the PRC. There were 35 customers (2009: 22 customers) with balances greater than 1 million (US$0.1 million) accounting for just over 82.6% (2009: 81.0%) of total accounts receivable (excluding bills receivables). The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets mentioned in Note 23. The Group does not hold collateral as security. | ||
Cash and fixed deposits are placed with banks and financial institutions which are regulated. | ||
Liquidity risk | ||
The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows, and having adequate amounts of committed credit facilities. | ||
The table belowsummarizesthe maturity profile of the Group’s financial assets and liabilities based on contractual undiscounted payments. |
One year | One to five | |||||||||||
As at December 31, 2010 | or less | Years | Total | |||||||||
Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||
Financial assets: | ||||||||||||
Trade and bill receivables | 4,234,475 | — | 4,234,475 | |||||||||
Other receivables: | ||||||||||||
Staff advances | 3,649 | — | 3,649 | |||||||||
Amounts due under guarantee contracts, net | 12,129 | — | 12,129 | |||||||||
Associates | 18,604 | — | 18,604 | |||||||||
Other related parties | 50,726 | 58,914 | 109,640 | |||||||||
Others | 126,018 | 6,619 | 132,637 | |||||||||
Cash and cash equivalents | 4,060,990 | — | 4,060,990 | |||||||||
8,506,591 | 65,533 | 8,572,124 | ||||||||||
Financial liabilities: | ||||||||||||
Interest-bearing loans and borrowings | 423,543 | 201,850 | 625,393 | |||||||||
Preference shares | — | 861 | 861 | |||||||||
Trade and other payables | 7,891,357 | — | 7,891,357 | |||||||||
Finance lease liabilities | 9,743 | 18,008 | 27,751 | |||||||||
8,324,643 | 220,719 | �� | 8,545,362 | |||||||||
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35. | Financial risk management objectives and policies (cont’d) |
Liquidity risk (cont’d) |
One year | One to five | |||||||||||
As at December 31, 2009 | or less | years | Total | |||||||||
Rmb’000 | Rmb’000 | Rmb’000 | ||||||||||
Financial assets: | ||||||||||||
Trade and bill receivables | 2,506,701 | — | 2,506,701 | |||||||||
Other receivables: | ||||||||||||
Staff advances | 7,394 | — | 7,394 | |||||||||
Amounts due under guarantee contracts, net | 12,557 | — | 12,557 | |||||||||
Land deposits | 5,000 | — | 5,000 | |||||||||
Associates | 44,662 | — | 44,662 | |||||||||
Other related parties | 20,310 | 61,222 | 81,532 | |||||||||
Others | 91,627 | 10,961 | 102,588 | |||||||||
Cash and cash equivalents | 3,657,981 | — | 3,657,981 | |||||||||
6,346,232 | 72,183 | 6,418,415 | ||||||||||
Financial liabilities: | ||||||||||||
Interest-bearing loans and borrowings | 667,173 | 411,875 | 1,079,048 | |||||||||
Preference shares | 485 | 1,634 | 2,119 | |||||||||
Trade and other payables | 6,187,048 | — | 6,187,048 | |||||||||
Finance lease liabilities | 9,748 | 25,243 | 34,991 | |||||||||
6,864,454 | 438,752 | 7,303,206 | ||||||||||
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36. | Capital management |
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance except where decisions are made to exit businesses or close companies. | ||
The capital structure of the Group consists of debts (which includes the borrowings and trade and other payables, less cash and cash equivalents) and equity attributable to owners of the Group (comprising issued capital and reserves). |
31.12.2009 | 31.12.2010 | 31.12.2010 | ||||||||||
Rmb’000 | Rmb’000 | US$’000 | ||||||||||
Interest-bearing loans and borrowings (Note 19) | 1,079,048 | 625,393 | 95,387 | |||||||||
Trade and other payables (Note 29) | 6,190,246 | 7,902,317 | 1,205,283 | |||||||||
Less: cash and cash equivalents (Note 25) | (3,657,981 | ) | (4,060,990 | ) | (619,393 | ) | ||||||
Net debt | 3,611,313 | 4,466,720 | 681,277 | |||||||||
Equity | 5,409,790 | 6,785,927 | 1,035,007 | |||||||||
Total capital and net debt | 9,021,103 | 11,252,647 | 1,716,284 | |||||||||
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. | ||
No changes were made in the objectives, policies or processes during the years ending December 31, 2010 and 2009. |
37. | Fair values of financial instruments |
Fair value hierarchy | ||
The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: |
Level 1 — | Quoted prices (unadjusted) in active markets for identical assets or liabilities | |
Level 2 — | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and | |
Level 3 — | Inputs for the asset or liability that are not based on observable market data (unobservable inputs) |
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37. | Fair values of financial instruments (cont’d) |
Fair value hierarchy (cont’d) |
The Group has a financial asset in level 1. The Group owns shares in Thakral Corporation Ltd (“TCL”), which is a company listed on the main board of the Singapore Exchange Securities Trading Limited (the “Singapore Exchange”) and is involved in the manufacture, assembly and distribution of high-end consumer electronic products and home entertainment products in the PRC. As at 31 December 2010, the Group classified the investment as held for trading and measured the investment at fair value through profit or loss. The Group does not have any financial instruments in level 2 and level 3 of the hierarchy. | ||
Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value. | ||
The Group’s financial assets consists of the carrying amounts of trade and bills receivables, other receivables, cash and cash equivalents, interest-bearing loans and borrowings, trade and other payables and other finance lease liabilities approximate their fair value due to their short term nature. | ||
Other financial assets and liabilities | ||
The carrying amounts of other receivables (long-term) and interest bearing loans and borrowings (long-term) approximate their fair value as their interest rates approximates the market lending rate. |
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38. | Events after the balance sheet date |
(a) | S$30.0 million credit facility with Bank of Tokyo-Mitsubishi, UFJ Ltd, Singapore Branch (“BOTM”) | ||
On March 11, 2011, the Company entered into a new facility agreement with BOTM to re-finance the existing revolving credit facility. The new unsecured, multi-currency revolving credit facility has a committed aggregated value of S$30.0 million with three-year duration from March 18, 2011 to March 18, 2014. The new facility will be used to finance the Company’s long-term general working capital requirements. Among other things, the terms of the facility require that Hong Leong Asia Ltd. (“HLA”) retains ownership of the Company’s special share and that the Company remains a consolidated subsidiary of HLA. The terms of the facility also include certain financial covenants with respect to the Company’s tangible net worth (as defined in the agreement) as at 30 June and 31 December of each year not being less than US$120 million and the ratio of the Company’s total net debt (as defined in the agreement) to tangible net worth as at 30 June and 31 December of each year not exceeding 2.0 times, as well as negative pledge provisions and customary drawdown requirements. | |||
(b) | US$30.0 million credit facility with Sumitomo | ||
On March 18, 2011, the Company entered into an unsecured multi-currency revolving credit facility agreement with Sumitomo for an aggregate of US$30.0 million to refinance the US$30.0 million facility that was due to mature on March 25, 2011. The facility is available for three years from the date of the facility agreement and will be utilised by the Company to finance its long-term general working capital requirements. The terms of the facility require, among other things, that HLA retains ownership of the special share and that the Company remains a principal subsidiary (as defined in the facility agreement) of HLA. The terms of the facility also include certain financial covenants with respect to the Company’s consolidated tangible net worth (as defined in the agreement) as at 30 June and 31 December of each year not less than US$200 million and the ratio of our total consolidated net debt (as defined in the agreement) to consolidated tangible net worth as at 30 June and 31 December of each year not exceeding 2.0 times, as well as negative pledge provisions and customary drawdown requirements. The Company has also undertaken to make available to the bank within 180 days after the end of its financial year (beginning with financial year 2007), copies of its audited consolidated accounts as at the end of and for that financial year. | |||
(c) | Changes in shareholding of HLGE | ||
With the conversion of 17,234,000 Existing HLGE RCPS B into HLGE ordinary shares on the Mandatory Conversion Date, the Company’s shareholding interest in HLGE increased from 47.4% to 48.4% with effect from March 24, 2011 upon receipt of regulatory approval. |
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38. | Events after the balance sheet date (cont’d) |
(d) | Yuchai Rmb 1 billion short-term financing bonds | ||
Yuchai has received approval from China’s National Association of Financial Market Institutional Investors (“NAFMII”) for the issuance of RMB-denominated unsecured short term financing bonds amounting to Rmb 1.7 billion (“Bonds”). The Bonds are to be issued in two tranches. The first tranche of the Bonds amounting to Rmb 1 billion was issued on March 9, 2011 and will mature on March 9, 2012. The par value and issue price of each Bond is Rmb 100. The first tranche of the Bonds bears a fixed annual interest rate of 4.59%. Yuchai intends to issue the second tranche of the Bonds with a principal amount of Rmb 700 million in China at a later date, subject to market conditions. Subscription to and trading of the Bonds is only available in China to institutional investors of China’s National Inter-bank Bond Market. The lead underwriter and bookrunner for the first tranche of the Bonds was the Industrial and Commercial Bank of China. All the proceeds from the issuance of the Bonds are to be used by Yuchai as working capital. | |||
(e) | Sale and leaseback agreement | ||
On January 2011, Yuchai terminated the sale and leaseback agreement signed with CDB Leasing Company Limited (“CDB”) in 2009. YAMC repaid approximately RMB28 million in a lump sum to CDB for redemption of the full ownership of the finance lease assets. | |||
(f) | Sale of Guilin office building | ||
On April 27, 2011, Guangxi Yulin Hotel Company Limited entered into a sale and purchase agreement with a third party to sell its office building located in Guilin, Guangxi province for a total consideration of Rmb 120 million, where Rmb 60 million of down payment will be paid within 15 working days from the contract date, and the remaining Rmb 60 million will be paid by November 30, 2011. |
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